September 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 the Eighth District and across the country. 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: Good afternoon, everyone. The Beige Book was published yesterday; you can find it at stlouisfed.org.

As we dive into these discussions, it’s worth noting that summer is ending, which might bring new perspectives and developments across the districts.

I’m Matuschka Lindo Briggs, the Little Rock regional executive for the St. Louis Fed. Joining me are Joe Mahon, from the Minneapolis Fed, and Chuck Gascon, from the St. Louis Fed.

Lindo Briggs: Joe and Chuck, how are you both?

Joe Mahon: Hi, Matuschka and Chuck. I’m doing great. Thank you for having me on.

Charles Gascon: Yeah, Matuschka, it’s great to be back.

Lindo Briggs: Okay. Joe and the Minneapolis Fed team prepared this week’s national summary. And that is how our guests end up here. If it’s their turn to write that summary, we invite them to share insights on what’s being observed and discussed across the country.

Joe, why don’t you kick things off by highlighting what stood out to you most in this edition of the Beige Book?

Mahon: Well, in the national summary, we characterized economic activity as having increased modestly overall. We didn’t have any districts report that activity was down. I think what’s interesting is there was a mixed picture, in consumer behavior in particular, where we had reports of heightened price sensitivity on one hand, but also solid high-end purchases on the other.

As an example, there was a historic inn that noted an increasing divide between customers spending robustly on higher-end events. But then there was waning demand among those seeking their more value-oriented offerings.

Auto sales were also subdued, maybe downbeat consumer confidence there, but also high fuel prices and rising financing costs.

One brighter note was that tourism activity increased across most districts, and airlines were reporting really strong demand, despite higher airfares.

Lindo Briggs: I want to add to that tourism. Chuck and I were in a large part of the Ozark area of our region for the last two weeks, and contacts mentioned a late surge in tourism that helped some businesses break even. Factors such as unpredictable weather and fluctuating travel patterns seemed to impact those visitor numbers, making it tough for planning.

Chuck, anything to add?

Gascon: At this point, economic activity modestly expanded across our District. Employment was steady, and wage growth stayed moderate around 3%. But price pressures continued to be something that showed up in many of our reports.

Lindo Briggs: Joe, did you find any trends across different sectors of the economy?

Mahon: Manufacturing activity really picked up across most districts. Some of them highlighted ongoing strength in demand for defense- and data center-related orders. There was also an upstate New York concrete products producer that noted significant demand from transportation infrastructure and large-scale tech facilities.

Construction was interesting. There’s a split between residential construction, which declined generally, whereas nonresidential or commercial construction was increasing on balance. There was a Chicago contact that actually said, “Without data centers, construction would be in a recession.”

Service firms were reporting slight-to-modest increases in activity. Financial conditions improved slightly. Loan volumes were solid and increased across most districts. Agriculture is still a concern though; there was some slight improvement but generally pretty strained.

Lindo Briggs: I’m right there with you on the ag concerns. Diesel prices are surging at the worst time for agriculture, just as harvest activity ramps up; think of the combines, tractors and grain trucks moving crops. This added expense puts even more pressure on producers, making it harder to maintain.

Let’s continue with ag[riculture], Joe.

Mahon: In our district, the Minneapolis district — which covers the states of Minnesota, North Dakota, South Dakota, Montana, and then we have parts of Wisconsin and the Upper Peninsula of Michigan — producers were worried about drought conditions, particularly in the western part of our district. Dallas also reported that ag conditions deteriorated due to drought and extreme heat hampering crop conditions. But we continue to have reports from cattle producing areas: The livestock sector was really strong, and that was a source of strength. On the other hand, crop producers are still stressed.

Gascon: Matuschka, I would just add, from our row crop perspective, we’ve had that heat that Joe has mentioned, but fortunately, we’ve also had a decent amount of rain that’s actually put our row crop in a better position than our farmers anticipated earlier in the year. So, that was a little bit of a bright spot.

Lindo Briggs: Let’s move to our districts’ conditions. Joe, can you give us an overview of economic conditions in the Ninth District? And then, Chuck, you can follow with the Eighth District.

Mahon: We characterize the Ninth District economy as having expanded slightly since the previous report. Consumer spending was down in our district, and that was driven in part by weaker tourism being hampered by extreme heat in a lot of areas. And we also had wildfire smoke problems due to those fires in northern Minnesota and neighboring regions in Canada.

We had a lot of reports that the cost of living has become less affordable for many workers, even higher-income workers. There was a large retailer that reported that more purchases were shifting from cash and debit to credit. And there was a wealth management professional who said that spending among lower-income individuals was being sustained by increased borrowing, including from their retirement accounts.

A restaurant owner in northern Minnesota said, “We’re dealing with uncertainty in many layers, and disposable income affects us directly.”

Gascon: Joe, you really summarized a lot of the same things that we’ve been hearing in our District. Consumer spending has been mixed. It’s often driven by those higher prices and not necessarily retailers seeing higher sales volumes.

Manufacturing and services grew modestly — a lot of it fueled by data centers, defense and AI-related work — although supply chain issues and those elevated fuel costs continue to weigh on activity in our District.

Lindo Briggs: In Arkansas, the uncertainty that caused businesses to pause for a while—that’s starting to shift, with some contacts sharing that they may lay off a few employees in the upcoming months. So, I’ll definitely keep an eye on that.

Joe, let’s talk jobs, since I’ve already kind of headed that way anyway. What’s happening with employment levels across the country?

Mahon: In the national summary, we characterized employment as having risen slightly overall. We did see healthy labor demand reported most frequently from manufacturing, construction contacts and some service sectors. But retail and hospitality saw falling labor demand.

Manufacturing and construction firms were reporting adding staff in some cases to pursue growth opportunities. There was a construction contact that said that they were in dire need of younger, skilled labor. Kansas City reported in their section that labor was the top limiting factor to growth.

Lindo Briggs: In Arkansas, I’m hearing that labor conditions remain uneven across industry sectors, geography and workforce demographics. One manufacturer shared that the turnover rates are starting to tick up again.

Chuck, anything to add for our region?

Gascon: Employment levels in the District overall remain unchanged since the previous report. We had a staffing company in Kentucky that observed that manufacturers were hiring in a yo-yo pattern; they’re frequently pausing and then restarting their hiring efforts.Conversely, a professional services firm here in St. Louis maintains steady hiring; they have a robust backlog of contracts that they’re looking to fill. A recent survey of our District businesses reported the contacts expect to continue to expand their workforce in the coming months.

So, little bit better labor market conditions than in our previous report.

Lindo Briggs: Joe, how are wages trending, and where are we seeing the biggest increases?

Mahon: Wage growth was modest to moderate in most districts. There were significant wage increases being reported, most often in connection to skilled workers in construction and manufacturing.

A Maryland construction company actually implemented a 35% pay increase as a retention strategy, because labor markets in data center construction were so tight. In Chicago, wage increases were particularly large for skilled trades such as electricians, which makes sense when you think about it. Those are the sectors where you’re seeing strong demand, but workers with the right skills are hard to find.

Then we had contacts report that in order to help employees manage their higher costs of living, they were increasing wages earlier than they usually would or more than the usual amount. Others were offering flexible work schedules to reduce their commuting costs. Philadelphia’s contacts continue to report annual merit increases and cost-of-living adjustments in the range of 1% to 3% across industries, and that was slightly above their prepandemic average.

Lindo Briggs: Can you share your thoughts on the overall picture on price increases, and how does that compare to the previous period?

Mahon: The prices increased moderately overall, and if anything, that pace actually ticked down a notch on balance from the last time for overall prices. But there were significant pressures for nonlabor input costs; those remained robust for the 10th consecutive reporting period.

There was a manufacturer who described the impact of rising fuel costs related to the Persian Gulf conflict as “shockwaves through the chemical supply chain.” A large retailer reported that prices for petroleum-based products increased by more than 20%, whereas nonpetroleum-based product prices increased by about 2% to 3%.

Lindo Briggs: That’s interesting. Can both of you share — What can be driving these price increases? And are businesses able to pass these costs along to consumers?

Mahon: We saw strong input price pressures across multiple districts reported for manufacturing and construction contacts. We’re really seeing widespread reports of price increases, particularly for energy; raw materials costs, notably metals and petrochemicals; and then transportation costs, we’re hearing from across industries as having been particularly strong. Minneapolis manufacturing contacts were continuing to report steel and aluminum prices at or near record highs.

Gascon: Here in St. Louis, we reported that prices have risen at a robust pace, and they were pretty widespread. Retail and manufacturing contacts reported that they’re still seeing some tariff-related impacts, and those are showing up across multiple districts in the Beige Book. In St. Louis, a transportation firm described their goods and services costs as just simply out of control, and that was putting stress on their operations.

Firms are broadly reporting that they’re seeing significant health care and insurance cost pressures start to build as we’re getting into the time for reenrollments. They’re starting to get those price quotes showing up in their inboxes.

Mahon: One interesting thing, though, is that we had consumer-facing contacts in a few different districts noting that there was heightened price sensitivity among their customers, and that was actually putting a limit on their ability to pass through these input price increases. So, businesses are kind of getting squeezed between higher input costs on the one end and then price-resistant customers on the other end.

Gascon: One hundred percent; I completely agree.

Lindo Briggs: So, we spent time on agriculture, labor, wages and prices. Is there anything you want to make sure we touch on with our listeners before we wrap up?

Mahon: Yeah. One thing that comes up a lot now is the impact that artificial intelligence is going to have on the labor market, on demand for workers.

We’re really seeing a mix of both positive and negative effects of that. As one example, in Richmond, they reported that a financial institution was rethinking its approach to entry level positions due to their adoption of AI tools. On the other hand, they reported that recruiting agencies were saying there was heightened competition for AI leadership roles, and that was really driving up compensation for those workers because they’re harder to find.

Gascon: Matuschka, I would just add that the near-term outlook has slightly improved among the contacts in our District, although they’re still being weighed down by uncertainty, supply chain disruptions and some of these elevated fuel costs. But overall, the outlook is still slightly optimistic.

Lindo Briggs: Okay. Well, we’re out of time. I hope our listeners enjoy these thoughtful discussions.

To explore more of what is unfolding across the Eighth Federal Reserve District, visit the St. Louis Fed’s website at stlouisfed.org for a deeper dive into the latest developments.

The next Beige Book will be released on October 14, and you can catch our podcast October 15, the very next day.

Thanks for listening, everyone.

Mahon: Thank you for having me on.