Ten of Twelve Fed Districts Reported Growth. Five Reported No Employment Growth at All.

The Federal Reserve released the September Beige Book on September 2. It is built from anecdotes gathered from business contacts on or before August 24, which makes it a description of late summer rather than a reading of the present. What it describes is an economy still growing, but with the growth concentrated in a narrow set of industries and the labour market close to flat.

Activity

Ten of the twelve Districts reported slight to moderate growth. Two reported no change. Consumer spending increased marginally, and price sensitivity limited purchases. Auto sales were subdued, which the report attributes to weak consumer confidence and rising financing costs. Manufacturing strengthened notably, driven by defense and data centre demand. The overall outlook was positive but tempered by uncertainty about energy prices, policy decisions and international conflict.

Employment

This is the softest part of the report. Employment growth was minimal. Three Districts reported modest gains, four reported slight increases, and five reported flat employment. Demand held up in manufacturing, construction and selected service sectors. Retail and hospitality saw labour demand decline. Skilled trades and technical workers remained scarce. Wage growth was described as modest to moderate in most Districts, with the larger increases concentrated in construction and manufacturing roles.

Prices

Price increases accelerated moderately. Eight Districts reported moderate inflation, two modest increases, one slight and one robust. Input pressures remained elevated in manufacturing and construction, particularly for energy, transportation, metals and petrochemicals. Tariff effects continued to be reported across multiple Districts. Health care and insurance costs surged broadly — and, importantly, firms said they could not fully pass those increases on to price-sensitive consumers.

What one District looks like up close

The Cleveland Fed's Fourth District report shows the same shape in more detail. Business activity expanded modestly. Manufacturing demand grew robustly on data centre development and defense spending, and some manufacturers picked up share from competitors facing supply constraints. Consumer activity, meanwhile, declined for a fourth consecutive period, with retailers reporting that elevated fuel and food prices constrained household budgets and that "the previous boost from tax refunds had dissipated."

On costs, the Fourth District reported input cost pressures persisting robustly for a tenth consecutive period, driven by fuel costs linked to Middle East conflict. One manufacturer described the effect as "shockwaves through the chemical supply chain." On labour, a construction contact said the firm was in "dire need of younger skilled labor."

Reading the two together

The national summary and the district report point at the same tension. Demand tied to capital spending — data centres, defense, the construction that serves them — is strong enough to lift the manufacturing numbers. Demand tied to household budgets is not. Firms are absorbing input costs they say they cannot pass through, which compresses margins rather than showing up immediately in consumer prices.