The U.S. economy is experiencing both headwinds and tailwinds. While the labor market is showing signs of strain, consumer prices continue to rise, and interest rate expectations remain fluid. For business owners, understanding these developments is critical to deciding when and how to bring a company to market.

Labor Market Softness: A Cooling Indicator

Recent employment data points to a slowdown:

• Jobless claims are at their highest levels in several years.
• August saw payroll additions of only ~22,000 jobs, signaling weaker hiring demand.
• The unemployment rate has risen above 4%, showing a clear shift from the historically tight labor markets of recent years.

Implications for Sellers:

This cooling labor market suggests reduced consumer spending power and slower demand growth. Buyers will be more skeptical of optimistic growth forecasts, and they will prioritize businesses with recurring revenue, long-term contracts, and essential products or services. For sellers, highlighting stability and resilience in demand will be essential.

August CPI Results: Inflation Persists

The latest Consumer Price Index (CPI) report shows that inflation is proving sticky:

• CPI rose 2.9% year-over-year in August, a step up from July.
• Core inflation (excluding food and energy) remains above 3%.
• Food prices jumped 0.6% in just one month — the largest increase in years.
• Fuel prices also rebounded, reversing prior declines.

Implications for Sellers:

Persistent inflation puts pressure on input costs and reduces consumer purchasing power. Buyers are placing a premium on businesses with:

• Pricing Power: The ability to pass costs onto customers without losing volume.
• Operational Efficiency: Cost controls and margin stability are vital.
• Sticky Revenue: Long-term customer relationships and high retention rates help offset economic volatility.

Interest Rate Outlook: Uncertainty Ahead

Markets continue to anticipate interest rate cuts in the coming months, but inflation complicates the picture.

• Softer labor data supports a case for easing monetary policy.
• Rising inflation argues for patience in cutting rates too quickly.
• The result: uncertainty about the exact timing and scale of rate reductions.

Implications for Sellers:

Debt is a key driver of deal activity, especially in private equity and leveraged buyouts. If borrowing costs decline later this year, acquisition appetite could increase. Sellers entering the market in Q4 will be positioned to benefit from improving financing conditions — but readiness is essential, as timing will matter.

Investor Sentiment: Markets Near Highs

Despite economic warning signs, U.S. stock markets remain near record highs. This creates a temporary disconnect between public market optimism and economic fundamentals.

Implications for Sellers:

• Private valuations often follow public sentiment with a lag.
• This creates a short-term window where deals can be struck at attractive multiples.
• However, if equity markets adjust downward to reflect economic softness, buyer caution will increase.