Research & Data
Service businesses in the New York area reported a sharp drop in activity in October, but they did not cut staff on balance. The Federal Reserve Bank of New York’s Business Leaders Survey, released Oct. 16, showed the headline business activity index falling 12 points to -20.7, its lowest level since March. The employment index rose about five points to 0.0, which signals that headcounts held steady.
The survey covers service firms in New York State, northern New Jersey and Fairfield County, Connecticut. Each index is the share of firms reporting an increase minus the share reporting a decrease. A reading of -20.7 means more firms saw activity fall than rise. It does not mean activity shrank by 20.7%. Responses for the October report were collected Oct. 2 to Oct. 9.
A broad pullback in activity
In October, 21.6% of respondents said business activity improved over the month and 42.3% said it worsened. In September those shares were 26.8% and 35.5%, and the index stood at -8.7. The business climate index barely moved, at -35.0 compared with -35.9. Just over half of respondents described the climate as unfavorable. The New York Fed said that suggests conditions remain much worse than normal.
“Business activity in the New York-Northern New Jersey region’s service sector declined significantly in October,” Richard Deitz, an economic research advisor at the New York Fed, said in the report. “Employment was flat, and price increases remained widespread.”
The labor readings
The employment number is a balance of two equal shares. In October, 19.7% of firms reported more employees and 19.7% reported fewer, for an index of 0.0. In September, 19.0% reported more and 23.9% fewer, for -4.9. The bank said employment “held steady after edging lower last month.”
Pay is still rising, but a little more slowly. The seasonally adjusted wages index slipped to 28.2 from 30.3. A third of firms reported higher wages and 5.2% reported lower wages. The New York Fed described wage growth as modest.
Firms expect to hire more in the coming months. The index for expected employment six months out rose to 9.5 from 5.0. The expected wages index climbed to 36.6 from 34.1.
Prices climb as the outlook darkens
Costs stayed high. The prices paid index edged up to 70.0 from 69.0, with 70.9% of firms reporting higher input prices. The prices received index, which tracks what firms charge customers, rose 2.6 points to 36.3. That is its highest level in four years, and the bank said selling-price increases were the fastest since 2022. Capital spending slipped further, with that index down two points to -4.2. The supply availability index rose to -13.3 from -15.8, meaning supplies are still getting harder to obtain, though less so than in September.
Firms also grew more pessimistic about the next six months. The future business activity index fell 10.1 points to -5.1. It was the first negative reading since December 2025 and suggests firms expect a small decline in activity. The expected business climate index fell to -20.8. The index for planned capital spending turned negative at -2.9.
How this fits with the factory survey
The service survey runs alongside the New York Fed’s Empire State Manufacturing Survey, which was released Oct. 15 and showed its headline index for New York State factories at 25.5, the highest in nearly five years. Taken together, the two October readings show regional manufacturers and service firms moving in opposite directions.
What it means for job seekers
The October figures point to employers holding on to the staff they have rather than shedding workers, even as business weakens and costs climb. If activity keeps weakening, how long that lasts is the question. For now, firms’ own hiring expectations remain positive.
Caveats
The survey is small and regional. It goes to a fixed pool of about 150 service-sector executives, usually presidents or CEOs, and a typical month draws about 100 responses. Only the wages indexes are seasonally adjusted. The results describe the direction of change reported by firms, not measured employment or output, and they are not a substitute for Bureau of Labor Statistics payroll data. Starting with the October release, the New York Fed reports results to one decimal place instead of two. The next report is scheduled for Nov. 17.
Sources
- Federal Reserve Bank of New York, “Business Leaders Survey,” October 16, 2026. https://www.newyorkfed.org/survey/business_leaders/bls_overview.html
- Federal Reserve Bank of New York, “Business Leaders Survey: Covering service firms in New York, northern New Jersey, and southwestern Connecticut,” October 2026. https://www.newyorkfed.org/medialibrary/media/survey/business_leaders/2026/202610_blsreport.pdf
- Federal Reserve Bank of New York, “Empire State Manufacturing Survey,” October 15, 2026. https://www.newyorkfed.org/survey/empire/empiresurvey_overview
Featured photo: Restaurants and shops along Eighth Avenue near West 19th Street in Chelsea, Manhattan, at night on Oct. 3, 2024. Representative image; not a firm in the New York Fed survey. Photo: Eden, Janine and Jim, via Wikimedia Commons (CC BY 2.0). Cropped from the original.
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