May Beige Book Confirms Working Families are Falling Behind in Trump’s Economy

May Beige Book Confirms Working Families are Falling Behind in Trump’s Economy

The K-shaped economy comes into clear view as prices continue to rise, employers and workers lose confidence, and working families struggle to keep up

The Federal Reserve this week released its May 2026 Beige Book, offering an up-to-date look at the economy – including jobs, consumer spending, and inflation – in each of the 12 Federal Reserve Districts. This month’s report, the third since the escalation of the conflict in the Middle East, reveals that soaring input costs are triggering price hikes for consumers. Additionally, regional contacts warned of widespread instability in the labor market due to economic uncertainty and a housing market facing high interest rates and rising costs.

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

“Trump is choosing to keep prices high for working families. Americans lucky enough to be employed full-time are losing faith in their ability to keep up with inflation as paychecks lag and the labor market stalls out. High prices for essentials like groceries and a tank of gas are busting household budgets and eliminating breathing room for middle- and low-income families. Despite his own party’s opposition, the president is forging ahead with his reckless, costly war – and leaving working Americans in the dust.”

Background: 

The Federal Reserve’s Beige Book gathers firsthand economic insights via reports from businesses, banks, and community organizations across its 12 Districts. By comparing regional snapshots, the report provides critical insights into the national economic outlook. In the May edition, contacts reported:

• Middle- and low-income families are bearing the brunt of the rising cost of living while high-income families carry on, deepening an unequal, K-shaped economy. Rising prices for everyday essentials are worsening the divide between high-earning, high-spending Americans and working-class families.
  • A contact in Kansas City noted that middle-income households are having to squeeze “more life out of every dollar before deciding to spend it.”
  • While luxury travel firms and cruise lines remain resilient in Atlanta, budget-conscious segments have experienced significant decline, with travelers shortening their stay to reduce costs.
  • A department store in New York indicated buoyed sales by high-income consumers purchasing luxury goods — especially wrist watches — while other middle- and low-income mall shoppers exhibited “subdued” sales.
  • Atlanta consumers’ prolonged price sensitivity has led to decreased restaurant traffic and a decline in travel and tourism demand, while luxury travel markets remained unaffected.
• A “low-hire, low-fire” labor market is trapping fearful workers while AI threatens entry-level positions. Widespread economic uncertainty from continued tariffs and persistent inflation means businesses are delaying expansion, leading cautious employees to remain in their current roles – even if it means staying in worse-paying jobs.
  • A construction contact in Cleveland noted that employees were “nervous and stressed” and believed employees were reluctant to “risk” leaving for higher-paying opportunities.
  • In Richmond, an HR firm indicated that clients have explicitly slowed hiring for new roles due to uncertainty, while their existing employees seemed reluctant to leave “something stable” for new opportunities.
  • Corporate recruiters and staffing agencies in Boston noted that corporate caution is affecting the next generation of workers, observing a significant drop in demand for entry-level workers, “possibly driven by AI.”
  • Outside of the Beige Book, other indicators confirm a fragile labor market. May’s Challenger Report shows employers announced 97,006 job cuts last month, the highest May total since the COVID pandemic rocked the economy in 2020. For the third consecutive month, companies’ top reason for layoffs was AI adoption.
• Trump’s war in the Middle East is still driving up energy costs and sending price shocks throughout the economy. Producers, manufacturers, and small businesses are facing higher transportation and input costs, a clear sign that the price impacts of Trump’s reckless Middle East policies will continue to burden Americans for months to come.
  • Contacts in nearly every District reported that fertilizer price spikes tied to the Iran war are already pushing food prices higher. Apple growers in New York warned that these higher input costs will continue affecting harvests through the summer and fall, putting strong upward pressure on prices for months to come.
  • Businesses in Cleveland overwhelmingly pointed to the Middle East conflict as the primary driver of recent price increases. Many said the resulting supply chain disruptions and input cost pressures are comparable to those experienced during the COVID-19 pandemic.
  • In Philadelphia, while consumer-facing firms are holding price increases steady to preserve demand, annual prices for manufacturers have climbed to a two-and-a-half-year high of over 4%.
  • A steep 50% fuel surcharge on domestic freight along with costs from tariffs were “extremely hard to pass along via retail prices,” noted a furniture retailer in Richmond.
• The housing market remains gridlocked due to high interest rates and economic uncertainty, pushing buyers to the sidelines and spiking rents. High interest rates coupled with anxieties surrounding increased cost of living are keeping buyers and sellers stagnant.
  • In Rhode Island, single-family home sales plummeted in April to their lowest level recorded since record-keeping began in 2010.
  • A New York City contact reported that rental markets remained incredibly tight, with record-high rents expected to increase even more as high mortgage rates deter potential buyers.
  • Homebuilders in Atlanta reported few potential buyers looking for housing and increased buyer hesitancy, with one builder saying that even at lower price points, they “can’t give a house away.”
  • In Dallas, first-time buyer interest was described as “particularly weak due to affordability constraints,” forcing builders to offer steep discounts and incentives to attract buyers.