Fed Beige Book: Most districts described little or no net change in overall employment levels; Since the prior Beige Book, two of the twelve Federal Reserve districts reported moderate growth in economic activity

Overall Economic Activity Since the prior Beige Book, two of the twelve Federal Reserve Districts reported moderate growth in economic activity. Three Districts reported modest growth, while four reported slight growth, and three reported no significant change. Robust, broad-based growth in manufacturing led the moderate growth reported in the Dallas District. While not as robust, another six Districts reported modest to moderate growth from their manufacturing firms. The remaining five Districts noted little or no manufacturing growth. Reports on other sectors indicate little growth overall. Most Districts reported little or no change in overall consumer spending. Auto contacts noted flat to modestly lower sales in five of the six Districts that reported. Over half of the Districts noted that consumer spending was driven by high-income households. Even in Dallas, where District firms reported solid retail sales, there were “some reports of lower-income customers being more cautious with spending.” Tourism continued to grow, but firms in the Boston, Minneapolis, and San Francisco Districts noted a decline in sales from Canadian tourists. Overall, most Districts reported that firms have maintained a positive economic outlook for the coming months. However, expectations tend to be for slight growth, weighted toward manufacturing and burdened by persistent uncertainties. Labor Markets Most Districts described little or no net change in overall employment levels. While three Districts described modest increases, five reported slight increases, and four reported no significant change. Overall, labor market conditions were little changed. Labor supply was generally adequate to meet demand; however, shortages persisted for specialized, technical, and skilled trade workers. Five Districts reported that some firms had either reduced staffing levels (through attrition), delayed hiring, or anticipated less job creation after increasing productivity by investing in AI. Five Districts described moderate growth in overall wages, four reported modest growth, and two reported slight growth. Several Districts noted that inflation has spawned additional wage pressure in the form of higher cost-of-living demands from individuals as well as challenges from rising benefit costs. Staffing contacts in the Boston District noted that workers were motivated to seek new jobs as wage increases lagged inflation. Prices Three Districts characterized overall price growth as robust, while eight noted that growth was moderate—and three of the eight noted that input price pressures were intensifying, if not already growing robustly. One District reported modest price growth. Moreover, four Districts reported that the pace of price increases picked up since the prior period. Higher oil prices permeated all District reports. Firms reported elevated diesel prices and noted that fuel surcharges were passing on increased costs throughout the supply chain. Contacts in multiple Districts also noted continued price pressure from other commodities, tariffs, and insurance. Consumer-facing firms noted tighter profit margins as price-sensitive customers continue to resist price hikes. Contacts are managing their margins with selective price hikes, targeted incentives, and menu changes that reduce their costs. Firms in several Districts cited persistent uncertainty around energy and tariffs and expect that prices will increase further in the coming months, as existing contracts expire, and firms must renegotiate hedge contracts for their own inputs and/or delivery contracts to their customers.