The latest Fed Beige Book shows stable employment but growing signs of economic strain. Layoffs are increasing, consumer spending is softening, and middle-income households are feeling the pressure amid tariffs and reduced immigration.
Economic activity was little changed and employment largely stable in recent weeks, the Federal Reserve said on Wednesday. However, there were “emerging signs of weakness,” including more layoffs and middle- and lower-income households pulling back on spending.
“In most districts, more employers reported lowering headcount through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies,” the Fed said in its latest Beige Book report, a collection of surveys, interviews, and qualitative data from the 12 regional Fed banks.
“Nevertheless, labor supply in the hospitality, agriculture, construction, and manufacturing sectors was reportedly strained in several districts due to recent changes to immigration policies.”
Rare Stock Market Rally: What History’s Four Similar Eras Reveal About 2025
Beige Book Gains Significance Amid Data Delays
Published two weeks before each Fed interest rate-setting meeting, the Beige Book offers central bankers more timely insight into the nation’s economic health.
With the government shutdown leaving a “data vacuum,” the report may “get more weight than usual” in Fed deliberations. It follows last month’s decision by policymakers to reduce the policy rate by a quarter of a percentage point.
The release coincided with what was supposed to be a key inflation report from the Bureau of Labor Statistics—now delayed until October 24 due to the shutdown. Other federal economic data, including the monthly retail sales report, are also postponed until the government reopens.
Consumer Spending “Inched Down” Across Regions
The Fed noted that overall national consumption “inched down,” particularly on retail goods. Five of the twelve regions reported lower consumer spending.
“Some retailers were cautiously optimistic about the upcoming holiday sales season, but a few expect holiday sales to be ‘meh,’ and noted that tariffs may soon cause prices to rise, resulting in further softening of demand,” said the Atlanta Fed. “Diners continued to pull back by skipping desserts and/or alcoholic beverages.”
Spending patterns also diverged along wealth and income lines. Lower- and middle-income households showed greater sensitivity to inflation, while upper-income consumers accounted for most spending gains.
“Community contacts report rising food pantry usage among both low- and middle-income households, growing reliance on ‘buy now, pay later’ services, and elevated credit card delinquency rates,” the St. Louis Fed said.
“A hotel owner in Missouri reported that travel demand had dipped in the past few months, especially among middle-class consumers, and described the current environment as a ‘middle-class recession’ that is affecting select-service hotels.”
Layoffs Linked to Weak Demand and Tariffs
The Beige Book data, collected through October 6, aligned with Wall Street’s estimates of rising unemployment insurance claims across states.
“A South Carolina home builder reported a decline in demand due to increased prices, which they said would result in imminent layoffs,” the Richmond Fed noted.
“One manufacturer said that they had postponed layoffs while waiting for industrial production to recover but could not delay cuts any longer,” reported the Cleveland Fed.
Meanwhile, prices continued to climb, driven largely by tariffs.
“Tariff-induced input cost increases were reported across many districts, but the extent of those higher costs passing through to final prices varied,” the Fed said. The word “tariff” appeared 64 times in the report, compared to 100 times in the previous Beige Book from August.
Immigration Policies Add to Labor Strain
The report also pointed to difficulties in hiring entry-level workers due to immigration restrictions.
“A few contacts in construction and manufacturing noted more difficulty finding workers for their entry-level positions, and they attributed that to reduced immigration,” the San Francisco Fed reported.
“Outlooks deteriorated with slowing demand, policy uncertainty, and inflation highlighted as the top concerns for businesses,” the Dallas Fed added.
Fed Policymakers Closely Watching Business Sentiment
Financial markets are “betting heavily on another interest-rate reduction” at the Fed’s October 28–29 meeting, but central bankers appear closely divided. Policymakers are paying special attention to “conversations with business and community leaders.”
“Anecdotes become data,” said St. Louis Federal Reserve President Alberto Musalem. “Sometimes you have moments where you have been hearing a story for the past six or 12 months, but suddenly a new story emerges, and you get these inflection points, and you often get those in the conversations before you get them in the data.
