Ninth District businesses strain under unpredictable conditions

Ninth District businesses struggled with continued economic uncertainty at the start of the new year, according to the January General Business Survey from the Federal Reserve Bank of Minneapolis.

The survey, which received 1,073 responses, asked business owners across the Ninth District about business conditions in the last quarter of 2025 and their expectations for the new year. Nearly half of respondents reported declines in revenues and over half saw profits shrink since last year. Many noted challenges with declining customer demand and high costs.

Most businesses were not actively hiring workers. Those that were looking for workers faced difficulty finding them. However, a higher share of businesses expected to increase their staff levels in the next six months than those that expected staff levels to decrease.

Despite somewhat upbeat labor expectations, business owners were mixed in their overall outlook for the first half of this year. For many, the uncertainty in the economy made it difficult to plan for the future.

Uncertainty drives down demand

Just under half of respondents reported that revenues had declined compared with the same quarter last year (Figure 1). A larger share, 55 percent, experienced profit declines. More small businesses experienced declines than larger businesses.

Most business owners did not expect revenues or profits to increase in the next quarter; only a fourth expected revenue growth.

Across the Ninth District, respondents consistently pointed to increased input costs and declining customer demand as major challenges for their business. Sixty-five percent of businesses said their wholesale prices increased by more than 5 percent over the year, compared with 43 percent of businesses in January 2025.

Some business owners commented that they were uncertain about future price increases and noted concern that passing these costs to customers would drive more away. Only 40 percent raised their prices for customers by more than 5 percent.

“Cost of goods, labor and utilities have all gone up while our products have stayed the same price to stay competitive,” a Wisconsin manufacturer wrote.

“I can’t predict prices for imported ingredients or expect them to stay the same,” commented the owner of a restaurant in Michigan’s Upper Peninsula.

In Minnesota, businesses frequently mentioned that the increase in immigration enforcement in the state had affected their operations.

“Our business operates in a community that has experienced an abrupt decline in customer activity due to fear, uncertainty, and reduced mobility among working families,” wrote the owner of a Minneapolis restaurant. “This has resulted in a sudden demand shock that is not reflective of underlying business performance or long-term viability.”

Low-hire, and very low-fire

Nearly 60 percent of businesses were not actively hiring workers at the time of the survey. However, only a small share of businesses expected their staffing levels to decline in the near future. Most who expected a decline reported that it would be through attrition rather than layoffs.

For those who were hiring, most were looking to fill positions that opened due to turnover. A smaller but notable share was trying to add new positions (Figure 2).

However, hiring businesses reported difficulty finding workers for open positions, especially qualified ones.

“This business is situated in a county with a 4.7% unemployment rate touching another county with a 6% unemployment rate and it is still difficult to find a person to apply, let alone a person we wish to hire,” explained the owner of a professional services business in South Dakota.

A Montana construction company owner wrote that there is “difficulty recruiting trained labor. Easy to find nonskilled labor but extremely difficult to hire skilled labor.”

Most businesses still increased wages over the last year but reported continued difficulty affording the higher labor costs. A little over a third of businesses had not increased wages at all, similar to the year prior.

“Given current economic uncertainty and reduced revenues, we expect to keep wages stable in the near term while prioritizing employee retention,” wrote the owner of a food store near Rochester, Minnesota.

A wholesale business owner outside Duluth, Minnesota, said that they “would like to give raises, but [there is] not enough confidence in the economy right now.”

Some Minnesota business owners reported additional challenges with adjusting to a new paid leave policy that went into effect in January 2026. “It is a lot [to] juggle and pushes us to want to hire more part-time instead of full-timers,” wrote a hospitality business owner near St. Cloud.

Outlook mixed across district

Overall, businesses were mixed in their outlook for the next six months: about 37 percent were pessimistic while 39 percent were optimistic. The remainder of businesses were neutral.

Those who were optimistic often indicated that their optimism was tenuous. “Our hope is to maintain our position, not looking for growth,” wrote the owner of a Montana financial services business.

“Cancellations for January affected revenues and declined by 15%,” commented a Minnesota hotel owner. “Current expected purchases would hope to come through but if more issues arise in the Twin Cities and elsewhere those expected purchases could cancel.”

The General Business Survey was conducted from January 12 to February 6, 2026. The survey received 1,073 responses from business owners and key financial decision-makers of firms across the Federal Reserve’s Ninth District, which includes Minnesota, Montana, North Dakota, South Dakota, the Upper Peninsula (UP) of Michigan, and northwestern Wisconsin.

About 67 percent of responses came from businesses in Minnesota, 12 percent from North Dakota, 8 percent from South Dakota, 5 percent from northwestern Wisconsin, 5 percent from the UP, and 3 percent from Montana. Survey results were obtained using a convenience sample of businesses contacted by local partners. Because of these factors, readers should exercise appropriate caution when interpreting results.