Suddenly, Wall Street is worried that the U.S. economy is more ‘vulnerable’ than it looks

Bespoke Investment Group spotted something it did not like in the most recent National Federation of Independent Business survey this week: That small businesses increasingly report their “number one problem” is poor sales.

Of all the options in the survey, “the one problem that you don’t want to be your #1 problem is poor sales,” the asset manager says.

“During prior economic contractions, we’ve seen this reading for poor sales tick sharply higher.

As shown below, while still relatively low for now, it has begun to tick higher again recently.” The NFIB index fell to 97.9 in September, from 98.7 in August.

“The other major business surveys also generally suggest that activity lost a little momentum towards the end of Q3, likely weighed down by the rebound in global energy prices,” according to Samuel Tombs and Oliver Allen at Pantheon Macroeconomics. (They also note that only 411 companies responded to the survey, down from a level of around 1,200 over a decade ago.) Jobs growth is “essentially zero” outside healthcare Mark Zandi at Moody’s Analytics thinks the U.S. economy is “vulnerable.” He is especially worried about the labor market: “Monthly payroll growth has averaged around 40,000 over the past year and has been essentially zero when excluding the healthcare sector.

Hiring is moribund, hours worked are very low, and while the unemployment rate remains low, that is partly a reflection of declining labor force participation [from increased retirements and low immigration,]” he told Goldman Sachs’ Allison Nathan recently.

In addition, he’s concerned that higher rates being demanded by the Fed and the bond market could derail AI capex spending.

“AI capex is also vulnerable as a higher cost of capital makes investment more expensive and falling valuations make it harder to raise the capital necessary to sustain the current pace of the AI buildout,” he says.

“If rates remain at these levels or higher for longer than a quarter or two, AI could become the part of the economy that breaks.” Inflation is out of control: “Two wars need to end before we get any relief” That scenario—interest rates higher for longer—appears to be shaping up.

The consumer price index for September came in at 3.7%, up from 3.4% the previous month and ahead of analysts’ expectations.

The Fed may feel compelled to act by raising rates further.

“Inflation is cooking with gas,” Jamie Cox of the Harris Financial Group told Fortune in an email.

“It is abundantly clear where the inflation impulse originates, but two wars need to end before we get any relief.