Fed’s Beige Book Reveals Weakening Spending, Rising Hardship, and Shutdown-Driven Strain

Fed’s Beige Book Reveals Weakening Spending, Rising Hardship, and Shutdown-Driven Strain

Last week, the Federal Reserve released the November 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. The picture is one of an economy losing steam: consumer spending continued to weaken among low- and middle-income households, tariffs drove up costs for consumers, and the labor market cooled further.

With the government shutdown delaying the collection and release of key economic data, Beige Book anecdotes have taken on outsized importance — and the absence of reliable national figures has contributed to growing divisions among Fed officials over whether to cut interest rates at their December meeting.

Alex Jacquez, Groundwork Collaborative’s Chief of Policy and Advocacy, reacted with the following statement:

“The latest Beige Book captures what families have been saying for months: prices are too high and paychecks aren’t stretching far enough. While we may be missing much of the data we rely on to measure the health of the economy, these reports paint a clear picture: American communities are struggling and economic insecurity is on the rise.”

BACKGROUND

The Federal Reserve’s Beige Book plays a critical role in informing monetary policy decisions by highlighting regional economic conditions gathered from each Federal Reserve Districts’ contacts at businesses, banks, and community organizations shaping the U.S. economy. In the November edition of the Beige Book, contacts reported:

• Tariffs are driving up costs for consumers. Many businesses throughout Fed Districts reported being hard hit by Trump’s tariffs, and consumers are paying the price:
  • Nearly 30% of firms in the Federal Reserve Bank of Minneapolis increased the prices they charged to customers in October — and a similar share anticipated increasing their prices in the month ahead.
  • When asked if customers in the Federal Reserve Bank of Philadelphia region had become more price sensitive since last quarter, 37% of manufacturing firms and 59% of nonmanufacturers indicated greater sensitivity.
  • A grocery store chain in the Federal Reserve Bank of Boston District reported marking up the prices of beef, coffee, and cocoa products by considerable margins in response to supply-side cost pressures, including tariffs.
    • An owner of several restaurants in New Jersey noted that food prices, particularly for beef, had risen to all-time highs.
  • In the Federal Reserve Bank of New York District, one consumer-facing firm dependent on imported goods filed bankruptcy and a brass machining company said it may go out of business as a consequence of tariffs.
  • Some companies are taking advantage of tariffs to increase prices beyond the tariff amount:
    • One manufacturer in the Federal Reserve of Philadelphia District noted that “our larger competitors will raise prices in the first quarter of 2026. Not because it is justified, but because they can.
  • Small businesses are particularly hard hit by Trump’s chaotic tariffs, with many in the Atlanta District reporting an inability to negotiate with suppliers and limited pricing power to deal with tariffs.
• The labor market is cooling. Overall employment slipped in October, with about half of Districts seeing weaker labor demand. Despite an uptick in layoffs, firms more often reported relying on hiring freezes, replacement-only hiring, and attrition rather than layoffs.
  • In the Federal Reserve Bank of Philadelphia District, many contacts noted that even modest deployments of AI would enable them to not refill some jobs or to skip a recruiting class of entry-level workers.
  • The Federal Reserve of Philadelphia noted in their broad annual survey of all contacts that only a net 19% of firms hope to hire, the lowest share they have recorded since 2011 and way below the 39% average.
    • A restaurant contact in the same District noted that workers they lost to warehouse jobs in 2021-2022 are returning to augment their wages. The restaurant observed that “they haven’t lost their jobs, [but] they’ve had their hours reduced.”
  • A Minnesota mall contact reported that “far fewer” businesses needed additional holiday labor and related head count would increase by about half the number in a typical year.
  • An oilfield contact in the Federal Reserve Bank of Dallas noted “as long as we keep finding ways to keep production flat with fewer people, we’ll keep shrinking [employment].”
• Working families are under strain. Lower- and middle-income families are shifting their spending toward cheaper items and leveraging discounts, promotions, or pulling back on spending altogether. Meanwhile, upper-income shoppers have remained relatively resilient.
  • As a “K-shaped economy” takes root, contacts in the Minneapolis District noted that higher-income customers were unconstrained, but “customers in the middle to lower end of the financial spectrum are tightening the belt.”
    • Contacts in the San Francisco District noted that consumers at the lower end of the income distribution continued to reduce their discretionary spending, including on full-service restaurant dining, elective health care, entertainment, and beauty and personal services. They also noted that consumers switched to lower-cost alternatives and were more conservative with holiday spending plans.
    • While smaller retailers reported sharp declines, higher-end retail spending remained resilient. A New Jersey-based café noted that sales had been particularly weak, with the average order size shrinking, and a small restaurant chain reported declining sales.
  • In the St. Louis District, one restaurant owner reported seeing fewer customers and declines in spending per visit, while another restaurant owner noted their daily regulars were now coming in just two or three times a week and not ordering full meals like they used to.
  • Food pantries across the District of New York are struggling to keep up with record demand amid reduced donations, as the number of individuals relying on food assistance continued to grow due to rising food costs, coupled with delays in processing federal food assistance benefits.
  • In the Federal Reserve Bank of Atlanta District, bankers noted customers’ increasing reliance on debt to cover typical household expenses like food and utilities.

These troubling trends from the Fed’s November Beige Book match sentiments expressed by manufacturers in the latest ISM Manufacturing PMI and S&P Manufacturing PMI reports: 

• Even with the winter holidays looming, manufacturers are having a hard time finding buyers and warehouses collect unsold stock: “[…]The health of the U.S. manufacturing sector gets more worrying the more you scratch under the surface […] Profit margins are meanwhile coming under pressure from a combination of disappointing sales, stiff competition and rising input costs, the latter widely linked to tariffs.“ (Chris Williamson, Chief Business Economist at S&P Global Market Intelligence)
• Firms report that trade with international buyers is more difficult than during the pandemic: “At any given point, trade with our international partners is clouded and difficult. Suppliers are finding more and more errors when attempting to export to the U.S. — before I even have the opportunity to import. Freight organizations are also having difficulties overseas, contending with changing regulations and uncertainty. Conditions are more trying than during the coronavirus pandemic in terms of supply chain uncertainty.” (Electrical Equipment, Appliances & Components, ISM Manufacturing PMI survey respondent)
• Economic uncertainty is undermining firms’ ability to plan for the future — much less expand: “Domestic and export business have been lackluster. Our customers are taking prompt orders only and still don’t have confidence to build inventory, much less make expansion plans. In fact, most of any kind of ‘planning’ has been undermined by unpredictability due to inconsistent messaging from Washington. Artificial intelligence is in its infancy stages, producing confusing and most often inaccurate information. This also causes apprehensive consumer buying patterns, contributing to the challenge of forecasting demand.” (Wood Products, ISM Manufacturing PMI survey respondent)