Eleventh District Beige Book

Summary of economic activity

Economic activity in the Eleventh District weakened slightly over the reporting period. Declines were seen in nonfinancial services, retail, and banking. Weakness continued in the housing market, and energy activity was flat. The manufacturing sector remained resilient, however, with production growth continuing at a modest pace. Employment fell on net, and prices increased moderately. Outlooks generally worsened, with contacts citing an economic slowdown, tariff concerns, interest rates, and heightened uncertainty.

Labor markets

Employment continued to fall over the reporting period, though some hiring was seen in the manufacturing sector. Head count reductions were reported by firms in the service, retail, and energy sectors, with an oilfield contact noting “as long as we keep finding ways to keep production flat with fewer people, we’ll keep shrinking [employment].” Staffing services contacts noted steady demand for both temporary and direct hires, except in manufacturing where demand was up. Some said employers were delaying hiring decisions. A health-care contact cited hiring challenges for residency positions because of much-higher H-1B visa fees. Several contacts noted that AI is allowing workers to reduce time spent on routine tasks. Overall, wage growth remained modest.

Prices

Selling prices increased moderately overall, and input price growth remained elevated in the manufacturing and retail sectors due to tariff impacts. A manufacturer noted rising raw material costs from international vendors as well as national suppliers. Another said tariffs have now begun to more deeply impact their overall margin and profitability, and that they expect this to continue for the next several months. Some contacts said customers were pushing back on price increases. One noted difficulty in collecting outstanding customer payments.

Manufacturing

Factory output continued to grow at a modest pace over the reporting period, while new orders were largely unchanged. Strength was seen in durable goods, especially transportation equipment manufacturing. One contact noted steady auto assembly activity overall, and an increase in hybrid vehicle sales compared to year-ago levels. There was some weakness in nondurable goods, particularly food and petrochemical manufacturing. A petrochemical producer noted that customers were holding back or canceling orders in some cases due to the high level of uncertainty in the market, particularly regarding trade policy. Tariffs and trade policy uncertainty have clouded overall manufacturing outlooks, as has uncertainty about the strength of the economy in general.

Retail sales

Retail sales fell over the past six weeks, though wholesalers reported flat to increasing activity. Some retailers said sales were affected by the federal government shutdown, including a pharmacy who said patients were having trouble affording their medications. Auto dealers reported weak sales, causing inventories to build, and tighter margins due to higher costs. A food distributor noted a decrease in Hispanic shoppers due to immigration enforcement. Outlooks worsened overall, with contacts citing tariffs and softening consumer demand as headwinds.

Nonfinancial services

Activity in nonfinancial services contracted over the reporting period. Weakness was broad based across industries, with the exceptions of transportation services and of leisure and hospitality, though one contact said the government shutdown was taking a toll on hotel and travel demand. A negative impact from the shutdown was noted by a couple of other contacts as well, including a travel agency with a customer base largely consisting of federal agencies. Overall, the government shutdown added to the already extensive list of concerns among services firms, which includes tariffs, price pressures, policy uncertainty, and immigration enforcement. Several contacts said high interest rates remain a headwind, and some small businesses were struggling to obtain credit from banks. Outlooks among services firms worsened, on net, though revenue six months ahead is still expected to be higher than current levels.

Construction and real estate

The housing market remained under pressure. Foot traffic and sales stayed weak despite declining mortgage rates. Builders noted ongoing reliance on incentives to close deals, and new home inventories were elevated. Home starts slowed further and were lagging new home closings. Margin compression persisted, and outlooks remained pessimistic amid continued weak demand and elevated economic uncertainty.

Commercial real estate activity was mixed. Growth in apartment demand moderated in October, and rent concessions remained widespread. Meanwhile, office leasing improved, with contacts noting signs of stability. Demand for industrial space remained healthy but was slowing in some markets.

Financial services

Loan volume and demand fell in November after several months of growth. Volume declines were led by consumer and by commercial and industrial lending. Credit standards and terms were unchanged, while a broad-based decline was seen in loan pricing, with more than half of bankers reporting a decrease. Overall loan performance deteriorated at a faster pace than was reported in the previous survey. Bankers reported stable general business activity, and their outlooks remained mixed. Survey respondents said they expect growth in loan demand and business activity but continued deterioration in loan performance over the next six months. Financial and economic uncertainty and net interest margins were the top two outlook concerns cited by bankers, followed by liquidity, cybersecurity and fraud.

Energy

Drilling and well completion activity was flat over the past six weeks. Producers remained concerned about low oil prices and said that without a material increase in prices, U.S. crude oil production would decline in 2026. Breakeven costs for wells were rising due to increases in input costs. Several firms noted project delays due to low oil prices and an uncertain policy environment, but pipeline contacts were optimistic about their business going forward, crediting regulatory relief and favorable tax policies.

Agriculture

Drought conditions worsened somewhat across the district, though the warm and dry weather was favorable for the cotton harvest. Overall row crop production this year was solid, with yields generally coming in above average. However, the low crop price environment is tough on farmers, many of whom will rely on farm safety net programs this year to help them get by. Beef demand remained resilient, though exports waned, and cattle prices declined over the reporting period. Wholesale turkey prices were up substantially from last year, but it’s not clear how much this will impact retail prices for Thanksgiving, as many grocery stores lock in prices with wholesalers in advance and run holiday promotions and specials. Looking ahead, the farm outlook is challenged by dry soil conditions and sub-profitable crop prices.

Community perspectives

Nonprofits continue to see elevated demand for a broad range of social services. The pause in Supplemental Nutrition Assistance Program benefits was driving the need for additional food support, as well as contributing to demand for other services. One contact noted a notable increase in demand for career counseling services over the past six weeks. Another said that the fastest growing need is help getting employment quickly, noting that clients were not very interested in job training but rather getting any job right away to earn some income. Recent changes to state and federal funding were top of mind for contacts. For several nonprofits, funding delays and cuts materially impacted operations, including fewer delivered services.