Fed Flags Rising Economic Anxiety as Consumers Pull Back, Businesses Stall

Fed Flags Rising Economic Anxiety as Consumers Pull Back, Businesses Stall

Last week, the Federal Reserve released the October 2025 Beige Book which gives an up-to-date look at the economy—including jobs, consumer spending, and inflation—across all 12 Federal Reserve Districts. A consistent trend across the country is that rising health care costs are putting pressure on both businesses and families and that the labor market is weakened.

The Trump Administration’s chaotic trade policies are still causing problems across many industries, as businesses report that higher costs on imported goods—from beef to auto parts to packaging—are being passed directly on to consumers.

This month’s Beige Book also highlights the widening economic gap between working-class households and wealthy Americans, noting increased food pantry usage among low-and-middle income households in places like Boston and St. Louis, as well as a growing reliance on Buy Now, Pay Later loans to cover basic essentials.

Alex Jacquez, Chief of Policy and Advocacy at Groundwork Collaborative, shared his reaction:

“The latest Beige Book shows exactly how working families are getting squeezed by the Trump Administration’s economic mismanagement. Health care is more expensive and more people are having to borrow money just to afford the rising costs of everyday essentials. Trump’s handling of the economy is not sustainable for American businesses or American families.”

BACKGROUND

The Federal Reserve’s Beige Book plays a critical role in informing monetary policy decisions by highlighting regional economic conditions – gathered from the business, bank, and community organizational contacts of each Federal Reserve District – that are shaping the U.S. economy. In the October edition of the Beige Book, contacts reported that:

• Tariffs are driving up costs: Many businesses reported being hard hit by Trump’s hectic tariffs, and consumers are paying the price:
  • One manufacturer reported raising their prices because supplier costs had increased, despite having a primarily domestic supply chain.
  • A specialty appliance manufacturer from upstate New York hiked their prices for the second time this year to account for the impact of tariffs on their costs.
  • A brewing company in New York reported that elevated ingredient and packaging material costs were getting passed along to the consumer, while another brewing business in New York temporarily ceased production of kegs due to high steel prices.
  • Manufacturers, especially in the industrial and agricultural sectors, are facing weakened demand. One business reported that orders for these producers were down by roughly 25 percent.
  • Additionally, business warned that price passthrough resulting from tariffs has just begun and expect to see prices to continue to rise going into 2026, as pre-tariff inventory runs out.
• Health care costs are on the rise: Cuts by Trump and Republicans in Congress to health care programs like Medicaid and the Affordable Care Act have resulted in major health care cost increases, affecting businesses and families alike.
  • Many businesses reported increases in employer-sponsored health insurance expenses, with one business reporting a 10 percent rise in health care costs.
  • The GOP budget law’s cuts to Medicaid are driving up the costs of health care for families and forcing hospitals out of business. One community health care center in the New York region reported rising financial distress among their Medicaid patients, limiting patients’ access to care and straining their organization’s finances.
  • One Mississippi hospital said they’re facing financial distress despite participating in a federal program designed to safeguard continuing operations.
• The labor market is deteriorating: In most districts, more employers reported increased layoffs and attrition and slowed hiring citing weaker demand, elevated economic uncertainty, and even increased use of artificial intelligence technologies.
  • Across industries, many companies reported that declining business activity led to reduced labor demand and layoffs. As one restaurant owner stated, there’s been “no growth so no new positions will be added.”
  • In the San Francisco District, some of the manufacturing and health care firms that have seen significant staff reductions – through attrition, layoffs, and early retirements – have replaced roles with investments in artificial intelligence.
  • Firms across industries said that weakened business activity has led to reduced labor demand – even layoffs. One manufacturer said that they had tried to postpone layoffs for as long as they could while waiting for industrial production to recover but could not delay the cuts any longer.
• Households are struggling to stay afloat: Faced with looming economic uncertainty, low- and middle-income consumers are having to tap into their savings to cover basic needs – and cut their spending altogether where they can.
  • 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.”
  • The New England region reported that families in local communities are using food pantries more and having increased difficulty paying rent, utilities, and other bills.
  • While upper-income households continue to spend on travel, events, and luxury services, low-and middle-income households are relying on credit cards as inflation is eroding their purchase power. The St. Louis District reported the increased use of “buy now, pay later” services and elevated credit card delinquency rates.