November 2025 Beige Book Interview – Little Rock

Announcer: Welcome to this Beige Book episode at 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.

Now, let’s hear from our host, Regional Executive Matuschka Lindo Briggs, and St. Louis Fed Research Officer Chuck Gascon.

Matuschka Lindo Briggs: Good morning, everyone, and welcome to our final Beige Book podcast of the year. What a way to wrap up—broadcasting the day after Thanksgiving, with the government shutdown behind us and the holiday season in full swing. Today, we will be offering our thoughts on the outlook for the year and also share what we have been hearing.

Chuck, how was your holiday? Did your festivities reveal any economic insights?

Chuck Gascon: Overall, the holidays were great. With respect to economic insights, I did learn that technology and AI are great for most cooking assistance, but I think around the holidays, we should stick with traditions. It really messed up my cooking. My cell phone got destroyed. I used to rely on these old, messy index cards for recipes and just don’t have them anymore. So yeah, we need to pivot back to some of these traditions. I think I would be better off going into next year.

Lindo Briggs: Oh my goodness. I’m old school; everything’s printed. I will tell you, one of the things that I did see while grocery shopping is: You know when you see “out of stock”? Now they’re telling you why. It says, “Out of stock due to supply issues.” Strawberries come to mind. So, that was a change I’ve never seen—justifying the reason for out of stock.

But, all right. We have a lot to cover. So, let’s dive into that national summary.

Gascon: Okay. So, on the national picture, economic activity was really little changed since our previous report. According to most of the 12 districts, that was the big theme. New York and Philadelphia both reported modest declines in activity, and surprisingly, the Richmond Fed reported modest growth. So, big picture: Things are generally unchanged.

On the retail side of things, sales declined. But I would note that this was prior to the holiday shopping season really kicking off in full steam. So, we’ll take that as a notable caveat here. Some retailers did report that they had a negative impact on consumer purchases due to the government shutdown.

Reports on travel and tourism activity were little changed in recent weeks. But again, this was before holiday travel really started ramping up. This is a slow time of the year for that.

It’s also a slow time for real estate, but conditions were generally unchanged there. Actually, we’re seeing a little bit of an uptick in new listings of homes relative to a normal seasonal pattern. I think that is novel. Districts also noted some ongoing recovery in the office real estate market. So, that’s another positive development on the real estate front.

Manufacturing activity increased somewhat, although tariff uncertainty remained a headwind in that space.

Then lastly, tied to the government shutdown, we heard widespread reports from community organizations that they were having an increased demand for food assistance. I think that was widely reported in the news.

Lindo Briggs: Well, activity was also unchanged in our District, but contacts are continuing to report a slowdown in demand. Contacts also reported impacts from the government shutdown disrupting operations. When talking to contacts in Arkansas, the government shutdown kept uncertainty looming for many businesses.

One contact in Hot Springs expressed concern of reduced tourism to the national park and the area, which in turn would negatively impact hotels and restaurants. While I haven’t heard of layoffs in the area, when it comes to agriculture in the state, they are calling it a crisis, Chuck. Our farmer in Arkansas estimated that up to one-third of Arkansas farmers may go bankrupt or exit the industry to avoid losing land or homes.

A car wash in northwest Arkansas reported declining membership, as consumers cut back on higher-cost services. So, what are the national trends in the labor market? In our District, employment has been unchanged, with contacts reporting no change in employment levels.

Gascon: Overall, as you mentioned, the government shutdown was definitely an ongoing theme in many comments with respect to the labor market. Contacts reported that overall employment declined slightly in the reporting period, and there was a weaker demand for labor.

We have seen an uptick in layoff announcements, although most contacts are reporting that they’re using things like hiring freezes, replacement-only hiring or attrition to reduce their overall employment levels. Several employers also noted that they’re adjusting hours worked to accommodate changes in demand instead of adjusting employment.

Lindo Briggs: I had a health care service provider share that they were reducing hours due to lower volumes, and a staffing firm also reported delays in hiring due to companies’ experiencing lower volumes.

Wage growth appears to continue to cool in our District, but there are still challenges finding certain workers. What are the national trends on labor supply and wages?

Gascon: Across most districts, employers seem to be having an easier time finding workers. There are still pockets of difficulty for skilled positions, as well as fewer immigrant workers in certain sectors, like construction and agriculture, and that seems to be pulling back on the labor supply.

Wages generally grew at a modest pace, but again, there were areas where labor supply was more constrained, and that was leading to stronger wage pressures. One of the interesting themes in this report was that contacts know that rising health insurance premiums continue to put upward pressure on labor costs.

Lindo Briggs: That has real implications that workers may not directly notice. Health insurance costs go up more than expected, so then you may see employers look to smaller wage increases to make up that difference.

Gascon: That’s the most straightforward way to manage the higher-than-expected increase in labor costs with respect to health insurance. Other ways firms may manage this are to cut costs elsewhere, raise their prices or ultimately reduce profit margins.

Lindo Briggs: Well, this seems like a perfect place to pivot to inflation. What else are we hearing with respect to changes in costs and prices?

Gascon: Overall, prices rose moderately during the reporting period. Input cost pressures were pretty widespread in manufacturing and retail, again largely attributable to tariffs. Some districts noted that rising costs of insurance, utilities, health care and technology services were also putting upward pressure on their costs.

The pass-through of these higher costs to customers really varied, though. It depended on demand, competitive pressures in the marketplace and, ultimately, how price-sensitive customers were. There are multiple reports of margin compression, with some facing financial strain as a result of that margin compression.

Looking ahead, contacts anticipate upward pressure on costs, but plans to raise prices in the near term were really mixed—again, dealing with that competitive market.

Lindo Briggs: Well, in our District, inflation pressures have eased slightly compared with a few months ago. So, that is a positive development, Chuck. Economic optimism continues among a group of industries in central Arkansas despite ongoing labor and cost challenges. However, I continue to hear a lot about issues related to affordability from contacts. One contact described their cost pressure as stemming from inflation catching up from the past.

Gascon: Sometimes it can just take awhile for a price increase to work its way through the system. And that may be months; it could be years in some cases. It just depends on the market as to how it plays out, and how contracts are structured. While our District firms are generally trying to absorb cost increases due to weaker demand, a greater share do expect to increase their prices charged over the next six months. So, it’s really just a timing issue. These margins get compressed, and then when demand improves, firms are looking to raise prices.

Lindo Briggs: So, like a ripple effect.

Gascon: Yeah. Right now, households are really price-sensitive. And retailers are telling us that they can’t seem to raise prices when households have these tighter budgets.

Lindo Briggs: Many of our hospitality contacts indicated that sales have not met their expectations. One restaurant owner reported declines in spending per visit, and another noted their daily regulars are now coming in maybe one or two times per week. So, this conversation is taking us to the outlook for the holiday shopping season. If budgets seem stretched, what are the expectations for holiday sales?

Gascon: First of all, I would note that there were no mentions of an early start to the holiday season, and that has been something that we’ve seen in the past. It doesn’t seem like people are out buying early this year relative to years past. It may not be until next week that we get any firm signs of what’s going on. But at the big-picture level, expectations are mixed. Contacts told the Atlanta Fed District that they had a generally positive outlook. But they are relying on a bounce-back in consumer confidence for driving those stronger sales.

Minneapolis Fed contacts also have modestly positive expectations about holiday spending. But on the other hand, retailers in the San Francisco Fed District expected holiday sales to be comparable or slightly lower than last year.

Lindo Briggs: It wasn’t until you just mentioned it, but I usually start buying for the holidays in August/September. I have not bought one thing yet, and I didn’t even realize it till you just said something.

Gascon: Yeah, it wasn’t until recently that I just picked up a couple of things.

Lindo Briggs: So, we need to wrap up here. But before we go, this is the last report of 2025. What are contacts saying about the outlook for 2026?

Gascon: Since the previous report, the outlook hasn’t changed much nationally. Despite a lot of big swings going on in the economy, the district outlook deteriorated slightly across the nation. Contacts seem to see an increased risk of slower activity in the coming months. But there is some optimism among manufacturers that we are seeing trade policy uncertainty start to abate a little bit. At a big picture, I would say expectations are for the continuation of current trends. But that remains highly uncertain.

Lindo Briggs: All right, Chuck, thanks for your time. This provides important insight to what we’re 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 January 14, followed by our podcast January 15.

Thanks for listening, everyone, and have a safe holiday season and a happy new year.