Fed says hiring stays flat and inflation expectations rise amid widespread uncertainty
Economic activity in the United States declined slightly over the past six weeks, with hiring slowing and concerns rising over tariff-related price increases, according to the Federal Reserve's latest “Beige Book” report released Wednesday, as reported by CNBC.
The report stated that “economic activity has declined slightly since the previous report” issued on April 23.
All 12 Federal Reserve Districts reported “elevated levels of economic and policy uncertainty,” which contributed to hesitancy in both business and household decisions.
Hiring trends remained mostly unchanged across the US.
Seven districts described US employment conditions as “flat,” while most reported lower turnover and increased job applicants.
The Beige Book noted, “All Districts described lower labour demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive.”
On pricing trends, the report found that US inflation continued at a “moderate pace,” with broad expectations of increasing cost pressures.
“There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial.”
The report also stated, “All District reports indicated that higher tariff rates were putting upward pressure on costs and prices.”
Businesses across several regions considered a range of responses.
Some planned to reduce profit margins or implement “temporary fees or surcharges.” According to the report, “Contacts that plan to pass along tariff-related costs expect to do so within three months.”
The release came amid a shifting tariff landscape.
In early May, US President Donald Trump announced a relaxation of reciprocal tariffs on China.
China responded similarly, fuelling a Wall Street rally on hopes the tariffs might not be as severe as initially expected.
However, concerns over US inflation and broader economic slowdown persisted.
Tariffs were referenced 122 times in the report, up from 107 mentions in April.
The report found economic activity varied by region. Boston, New York, and Philadelphia experienced declines, while Richmond, Atlanta, and Chicago reported stronger growth.
In New York, the Fed observed “heightened uncertainty” and sharply rising input prices due to tariff-related costs.
Despite federal payroll reductions, Richmond recorded a slight hiring increase.
