Increasing uncertainty is trickling through the regional economy

Uncertainty has a way of multiplying.

That is the prevailing sentiment from recent roundtable discussions with two Minneapolis Fed advisory councils.

The Federal Reserve Bank of Minneapolis convenes and maintains advisory groups to gain insights into the Ninth District’s economy. The Community Depository Institutions Advisory Council advises the Bank on conditions affecting community banks, and its members are leaders of thrifts, credit unions, and banks with assets of less than $10 billion. The Ninth District Advisory Council consists of representatives from a variety of industries across the district, and advises the Bank on regional economic conditions.

At the groups’ most recent meetings this spring, Minneapolis Fed President Neel Kashkari summarized his views on the economy and answered questions. But the heart of the meetings consisted of participants reflecting on current economic conditions in housing, labor markets, inflationary pressures and consumer confidence, and credit and banking conditions.

Among many themes, uncertainty pervaded much of the discussion. Participants noted that hiring demand was softening, and one member said, “Labor uncertainty quickly translates to consumer uncertainty.”

Current conditions noted by community depository institutions

The Community Depository Institutions Advisory Council members reported that housing inventory remained tight in most parts of the Ninth District, though some urban areas saw more housing coming online and homes sitting on the market for longer than previously reported. Housing supply in certain areas was so tight that it was impacting labor availability and hindering employers’ ability to recruit for open positions.

Labor availability was mixed across the district depending on the location and industry. Rural and heavily agricultural areas that rely on immigrant workers were concerned about labor availability moving into the production season. However, urban markets saw improved labor availability of service workers. Members also reported that the labor supply for educated professionals remained healthy, and employers have seen a deeper pool of qualified candidates for open positions.

Participants consistently reported that consumers across the district were pulling back on spending, given uncertainty about tariffs and federal funding as well as general insecurity in the economy. Consumers were carrying higher balances on credit cards, and some institutions reported an uptick in delinquencies on consumer loans. While inflation wasn’t as much of a concern as it was in previous meetings of the group, consumer habits were shifting due to the persistently high cost of food and other household goods.

Participants reported consistent demand for consumer lending and an uptick in demand for home equity lines of credit, while mortgage origination rates were flat or lower than previously reported. Reports on commercial real estate lending were mixed, with some areas reporting an increase in lending due to business expansions and others reporting lower loan demand.

All members reported that fraud was an ongoing and deeply concerning issue impacting their customers and institutions. Scammers were becoming more sophisticated and patient with victims. Phishing, social engineering, digital identities, and romance scams were prolific. One member stated, “We’re breaking hearts daily in our lobbies,” as tellers explain to customers that the object of their affections is a scammer. Members were implementing different strategies to combat fraud and educate customers about how they can identify fraud and prevent future fraud attempts.

More insights from district businesses

Participants in the Ninth District Advisory Council reported that economic uncertainty was impacting consumer spending in the hospitality and tourism industry, causing a slowdown in tourism-dependent businesses. Those businesses were adjusting their 2025 expectations moving into the summer season. One council member reported that established businesses were struggling to plan due to tariff and labor uncertainty. Members reported that wholesale activity was down, as companies were sitting on existing inventory and saving capital rather than stocking up. Others reported the opposite—heavy purchasing to beat existing or expected tariffs.

Members with knowledge of the construction industry reported that smaller construction firms were acutely impacted by the pricing fluctuations stemming from new tariffs and were concerned about the long-term impact of continued price escalation. Additionally, firms were concerned about cuts to publicly funded projects and reduced staffing levels at government agencies involved with project permitting and completion.

Members also discussed shifting labor dynamics. Some members reported that manufacturers were working to retain staff despite softening market conditions. Other members reported difficulty recruiting seasonal employees for the upcoming harvest, construction, and tourism season, particularly in a changing immigration landscape; those employers relying on work visa programs were increasingly worried about labor availability. One member discussed higher education’s shift in two- and four-year degree programs: Colleges and universities are offering additional credentials and certifications within degree programs to support students’ transitions into the workforce and support industries with hiring challenges due to skills gaps in tight labor markets.

A manufacturer in the group noted that tariffs were both a challenge and an opportunity. Costs for imported inputs were rising, but so were orders from customers looking for domestic production of goods. At the same time, existing customers were cutting back on orders, and the company was getting letters that established customers “will not be taking price increases” for merchandise. As a small business, they said, “it feels like you’re just playing defense instead of trying to grow.”

A help to monetary policymaking

As Federal Open Market Committee members continue to balance the complexities of the Fed’s dual mandate of maximum employment and stable prices amid this uncertainty, insights from these two advisory groups provide real-time, ground-level perspectives to complement all the data that the Fed studies.