January 2026 Beige Book Interview

Announcer: Welcome to this Beige Book episode of the St. Louis Fed’s Timely Topics podcast, where you get the latest on what we’re hearing from business and industry contacts in Arkansas and across the Eighth District. The information shared in this podcast is received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Matuschka Lindo Briggs: Hello, and welcome to the first 2026 Beige Book episode of Timely Topics, the St. Louis Fed’s podcast series.

I’m Matuschka Lindo Briggs, the Little Rock regional executive for the St. Louis Fed, joined by Chuck Gascon, assistant vice president here at the St. Louis Fed.

Hey, Chuck, how are you?

Chuck Gascon: I’m doing great. Happy to be here.

Lindo Briggs: All right. This year, we want to introduce you to some of our great colleagues from across the Fed System. We will do that by including their insights. And we hope to add a fresh perspective from various districts by doing this. In this episode, we are delighted to be joined by Joe Mengedoth, a regional economist at the Richmond Fed.

Joe and the team at the Richmond Fed were responsible for writing the national summary for this week’s Beige Book. So, he probably has the best sense of anyone as to what contacts across the nation had to say.

Joe, welcome. Can you tell us what stood out to you in writing this report?

Joe Mengedoth: Yeah. Thanks for having me.

One of the first things that stood out was just that overall economic activity increased at a slight-to-moderate rate across the majority of districts, and that was an improvement over the last three cycles, going back to the early fall, when most districts were reporting no change.

This cycle, we saw consumer spending pick up, which was largely attributed to holiday shopping. But we also saw comments about diverging trends in household spending by income levels, with higher-income households spending on luxury goods, travel and tourism. While low- to moderate-income households were increasingly more price-sensitive and hesitant to spend on nonessential goods and services.

Lindo Briggs: Chuck, what did contacts in our District share about consumer spending around the holidays?

Gascon: It’s pretty similar to what Joe just described. Retailers reported stronger-than-expected sales late in the holiday shopping season, and also particularly strong sales among corporate customers—businesses buying gifts for their employees or for their clients.

Also similar to Joe’s comments, we heard that customers were holding off for deeper discounts and promotions because of this price-sensitivity issue. So, that was driving much of that late activity.

We didn’t receive many reports on travel and tourism, but a regional airport did note that their volumes were up and that they expected growth to continue in air travel this year.

Mengedoth: I can add a little bit more on travel and tourism, at least in our district. We heard some mixed results. We had hotels and event venues in North and South Carolina seeing increased activity, particularly around the holidays. But contacts in Virginia, on the other hand, saw weaker-than-expected spending on travel and tourism due to several factors, including adverse winter weather. But they also were reporting low business travel, particularly around the D.C. area.

Lindo Briggs: I definitely think weather affected us all. I do want to share that one retailer reported that the day after Christmas was one of the busiest days they saw all year. I also want to share that in rural parts, we heard it was a tough season if you didn’t also have e-commerce. So, people just didn’t buy as many items, and there were not as many events going on over this holiday season.

Enough about holiday shopping. Let’s roll into jobs here. Joe, what does the national picture on the labor market look like?

Mengedoth: Nationally, I would say employment was pretty flat, and has been for a while. Most districts this cycle continue to report little change in hiring, and several reports mentioned fewer people switching jobs. Multiple contacts reported exploring AI and other productivity enhancements to manage their workforce.

Multiple districts also reported an increase in the usage of temporary workers, with one contact telling the Minneapolis Fed that that allowed them to stay flexible in uncertain times.

In our district, we had a couple of contacts say that they were letting headcounts reduce by natural attrition and not replacing workers that left, and they didn’t expect to replace them until they saw increased demand.

Gascon: We heard things that were surprisingly similar here in St. Louis. A truck dealer considered suspending their hiring for open positions, but they know that they could easily ramp up hiring if demand picks up.

There are still some structural challenges. Our construction contacts noted that they were having ongoing challenges attracting workers due to an aging workforce and just less immigrant labor, as well.

Lindo Briggs: I did hear a district retailer say they cut all their part-time workers, and even though they are doing better in sales than they did last year, they’re not meeting plans. So, something to keep an eye on for them.

Joe, want to talk a little bit more on wages?

Mengedoth: Sure. In our district, we saw overall wage growth return to what was a pre-COVID level of growth. But we had some caveats to that. We continue to hear from some businesses who are employing highly skilled workers, skilled trades that they continue to face upward wage pressure for those jobs.

We also heard something kind of new from a recruiting firm this cycle, and that was that applicants were being pushed back on their salary expectations—firms coming back to them and saying, “No, we can’t increase …” or “we can’t offer salaries that high.”

Lindo Briggs: It sounds like continued cooling in the labor market, and wage growth is returning to normal.

Let’s move on to affordability. This is something that comes up many times in my discussion. So, let’s turn to prices and inflation. Joe, let’s start with you.

Mengedoth: Nationally, prices were growing at a moderate rate across a majority of districts this cycle.

“Cost pressures from tariffs” was another consistent theme. Several contacts said that they initially absorbed tariff-related costs, but now they’re beginning to have to pass those on to customers, as those pre-tariff inventories that were built up are now being depleted, or they were looking to preserve profit margins. Energy insurance cost was another thing that was mentioned as a significant strain on those margins.

Looking ahead, though, firms expect some moderation in price growth going forward. But overall, they anticipate price levels to remain elevated, particularly as they work through these increased costs.

Gascon: In our district, one retailer noted that customers were actively comparing prices as they were shopping. They had their phones out, and they were looking at the different prices on online channels or competitors’ markets. So, that price-sensitivity thing is definitely showing up.

Similarly, a manufacturer noted that they’re not going to change prices midyear because they want to avoid inconsistency across their different advertising platforms.

So, all being said, price pressures are still pretty evident, with home goods prices up sharply. That was one thing that did stand out in this report for us.

Lindo Briggs: I think it’s going to be awhile before we stop hearing about insurance costs.

Joe, I know Richmond gets some good real-time estimates of price changes. What did your most recent survey tell you?

Mengedoth: Our latest survey results indicated that service sector firms saw prices growing at a moderate rate, around 3%. For manufacturing, on the other hand, we saw a surge in price growth in the most recent month, with prices received increasing at a 5% rate year over year.

Lindo Briggs: All right, you guys, this was a great, great conversation. But it’s time to wrap up. Is there anything else we missed worth mentioning from either of you?

Mengedoth: Just to end on a bright spot: The outlook for the next several months is what we call “mildly optimistic.” Most districts expect a slight-to-moderate growth in activity over the next three to six months.

Lindo Briggs: Okay. That’s a perfect way to end. Joe, Chuck, thank you both for your time. This provides important insight into what we are hearing nationally and within our District.

For a full summary of what is happening in the Eighth Federal Reserve District, visit the St. Louis Fed’s website at stlouisfed.org.

The next Beige Book release will be March 4, followed by our podcast March 5.

Thanks for listening, and thanks for talking to us when we’re out in your communities. Have a great day, everyone.