U.S. Inflation Rises to 3.7% as Payroll Gains Are Modest; Small-Business Optimism Slips

U.S. inflation accelerated in September, with consumer prices rising 3.7% over the year, while payroll growth stayed modest and small-business optimism slipped just below its long-term average.

Consumer prices climbed 3.7% over the 12 months through September, compared with 3.4% through August. The Consumer Price Index for All Urban Consumers also rose 0.6% from August on a seasonally adjusted basis. Gasoline prices increased 9.1% for the month and accounted for more than half of the monthly increase in the overall index. The annual figure tracks price changes over 12 months, while the monthly reading compares September with August. The September inflation reading also comes alongside signs of slower hiring and weaker small-business confidence.

Employers added 29,000 jobs in September, below the average monthly gain of 45,000 over the prior 12 months. The unemployment rate remained at 4.2%. Health care added 17,000 jobs, fewer than its average monthly gain of 33,000 over the same period.

Small-business optimism also edged lower. The NFIB Small Business Optimism Index fell 0.8 point to 97.9, just 0.1 point below its 52-year average of 98.0. The survey’s Uncertainty Index rose one point to 90, compared with its historical average of 68. The optimism measure was close to its long-term benchmark even as uncertainty remained 22 points above its historical average.

Labor quality or availability was the most frequently named problem, cited by 26% of owners. Inflation ranked second at 20%, while poor sales and taxes tied for third at 11% each. The share naming poor sales rose 1 percentage point from August, marking a third consecutive monthly increase.

“Small business optimism stayed near the long-term average in September as Main Street owners remain uncertain about business conditions,” NFIB chief economist Bill Dunkelberg said.

Other figures showed continued economic growth. Real gross domestic product expanded at a 2.2% annual rate in the second quarter. In September, the Federal Open Market Committee raised its target range for the federal funds rate by a quarter point, to 3.75%–4.00%. The committee described economic activity as expanding at a solid pace while inflation remained elevated.