October 2025 Beige Book Interview – Little Rock

Matuschka Lindo Briggs: We have a lot to talk about today. And some of the key topics bubbling to the top include immigration, labor shortages and inflation. Luckily, we have Chuck Gascon here to help us peel the onion back on all of it.

Chuck, we have both been on the road these last few weeks and have not seen much of each other. I’ve been in Newport, Fayetteville and Bentonville, Arkansas; and Springfield, Missouri. Where have you been?

Charles Gascon: It doesn’t look like we’ve crossed paths. I was in Union, Missouri, to meet with manufacturers, then down to Dyersburg, Tennessee, and Memphis, then back to St. Louis to meet with some homebuilders. Then I met with our board of directors in Louisville, and I got some reports on West Tennessee. So, I think we got our whole District covered this time around.

Lindo Briggs: We do. And we’re not complaining in any way; this is what we love to do. This is what it’s about. We want to hear your voices.

As I talk to people on Main Street in Arkansas and southern Missouri, I am listening closely to what people are saying about the economy. There seems to be a mix of optimism and concern, and, I will also say, a lot of pride in local resilience. So, to put voices into perspective, why don’t you kick us off with what you were hearing across the country on a national level.

Gascon: On a national level, activity was little changed on balance since our previous report. Three districts reported slight-to-modest growth, five reported no change, and four reported a slight softening.

Consumer spending reports showed slight declines in retail sales in recent weeks, although aggregate consumer spending will likely be offset by stronger auto sales, as EV tax credits expired at the end of September, and that appears to have boosted sales, according to our auto dealers.

Lindo Briggs: Well, economic activity and employment in our District were generally unchanged. Contacts report that immigration policies have been resulting in labor shortages.

Gascon: Overall, employment levels were pretty stable, but demand for labor has been muted. So, that has offset some of that contraction in the supply of labor and those shortages.

Turning to inflation, prices rose further during the reporting period, with several districts reporting that input costs were rising faster, due to higher costs and services, as well as on goods.

With respect to the outlook, it really varied by district and sector. Sentiment improved in a few districts, while other districts continued to highlight economic uncertainty weighing down activity. Then a downside risk from a prolonged government shutdown also showed up in a couple of district reports.

Lindo Briggs: Let’s go back to immigration and the labor shortages. A construction firm in Memphis reported that the reduced labor pool was driving up labor costs and leading to project delays. A manufacturer contact in Arkansas says it will take time to train and replace labor. What did other districts report with respect to immigration and availability of workers?

Gascon: Comments that appeared were pretty widespread across several district reports. Contacts in the hospitality sector, agriculture, construction and manufacturing all noted that changes in immigration policy were stranding their labor supply. Interestingly, a staffing company told the Philadelphia Fed that they saw demand spike for some positions due to changes in the visa statuses. And the Atlanta Fed noted in their report that the impacts from changes in immigration policy and enforcement were more material than they previously reported but were concentrated in certain geographies and sectors.

Lindo Briggs: We also heard some contacts say that they’re not really hiring, yet not laying off workers either. Is this no-hire, no-fire theme occurring in other districts?

Gascon: The national summary noted that there were more reports of employers reducing headcounts through layoffs and attrition. The reasons cited were weaker demand, elevated uncertainty and, in some cases, investment in artificial technology as a way to save on labor costs.

Those hiring did seem to favor temporary and part-time hiring over full employment. The Boston Fed noted that layoffs became more common, citing cuts to grant funding as a contributing factor in the health care and education spaces.

Lindo Briggs: A familiar theme. We’re seeing some of those reports around here as well. Some contacts shared that they are streamlining as people retire and not replacing those positions, Chuck.

Gascon: Yeah. In the Cleveland Fed District, a manufacturer reported that they postponed layoffs, hoping that production will recover. But it hasn’t. So, they can’t delay those cuts any longer. And a similar thing came out with a South Carolina homebuilder reporting that declines in demand and higher prices would result in imminent layoffs at that firm.

Lindo Briggs: So, to be clear, it sounds like, overall, there has been an increase in layoff reports.

Gascon: Yeah, I think that’s a fair assessment, based on the information in this Beige Book report, although we don’t see a sharp uptick in state unemployment insurance claims, which is what I would be looking for to confirm that this is a meaningful change in the trend.

Lindo Briggs: So, a bit weaker picture on the national labor market.

Let’s turn to the inflation picture. You mentioned that prices rose further with input costs rising faster. I’ve been hearing a lot about prices increasing at the grocery store and for other essentials. Can you provide some more details on the national inflation picture?

Gascon: Businesses are reporting that input costs are increasing at a faster rate than their selling prices. Those higher costs stem from insurance, wages and benefits, technology services, as well as tariffs on imports. It’s becoming increasingly difficult for firms to raise prices, particularly on low-income households, as they’re still struggling with higher costs of some essentials.

The Philadelphia Fed noted that consumer-facing businesses were actually using discounts and promotions to sustain demand; this was for retail goods, as well as for hotel rooms and incentives on autos and new homes. So, that offset some of those pricing pressures due to that weaker demand.

Now, the challenge is that cost pressures can hold off only so long, and then they will have to raise prices. The Chicago Fed noted that some of their smaller retailers are already raising prices because of the tariffs that they’re facing.

Lindo Briggs: It took us a while to get there, but I was just waiting for the word “tariffs.” I don’t know about you, but I continue to hear a lot about tariffs locally. I don’t think I’ve sat in one meeting where it didn’t come up. Many contacts are still waiting to understand, though, how it’s all going to affect them and the consumer.

Gascon: It’s an ongoing topic at every meeting I’m in as well. The story’s complicated. Tariff-induced cost increases are reported in many districts, but to the extent that those are getting passed on to final prices is varied. Some firms are already seeing these cost pressures and trying to hold back in order to preserve market share and in response to pushback from customers. However, higher-income customers are willing to absorb some of those price increases. And in the case of manufacturing, some firms just have very transparent pricing, and they’re able to pass on those higher costs in the form of surcharges.

Lindo Briggs: I know we need to wrap up, but one more thing. Chuck, when we are out, we often tell people that while the Fed has tons of data and research, there’s always a lag to it. That’s why the Beige Book is so critical. It gives us that real-time pulse of what’s happening. You’ve done some interesting research on how sentiment from surveys connects with trends in the real economy. Can you break that down for us and share why this kind of qualitative information matters so much to policymakers?

Gascon: You talk about how much you and I have been on the road over the last couple of weeks, and we’ve got hundreds of pages of notes from meetings that we’ve had with contacts. This has been a place where I continue to do text analysis on the Beige Book, and try to understand how we can turn this big narrative on the economy into a data point each month, so that we can measure and access the economic data.

What I find is, with some careful analysis and removal of the noise from noneconomic factors, the sentiment scores do track economic activity very closely. And this is good news because it tells us that the “boots on the ground” information that we’ve been collecting in our District and across the system does serve as a pretty good foundation for tracking the economy.

It’s not always easy to separate the signal from the noise, but when we do it, it gives us a good baseline. And so it just again shows why we do what we do and how important it is for understanding the economy today.

Lindo Briggs: Chuck, thanks for breaking that down for us and also 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 November 26, followed by our podcast November 27. Thanks for listening, everyone.