Beige Book Report: Minneapolis
June 4, 2025
Summary of Economic Activity
Ninth District economic activity decreased slightly since the previous report. Employment was flat and wages grew moderately. Prices increased moderately overall, with greater pressure on inputs. Activity increased in manufacturing, and vehicle sales were up slightly. Consumer spending fell modestly. Construction fell slightly, while residential real estate activity decreased modestly and commercial real estate was flat. Agricultural conditions were flat at weak levels. Activity among minority- and women-owned business enterprises was mostly unchanged.
Labor Markets
Employment was flat since the last report. Surveys found that hiring sentiment and job openings rebounded modestly with warmer weather. However, employers said hiring was most often related to filling turnover; new openings for part-time and seasonal jobs also outpaced full-time positions. Hiring among construction firms—including for new, full-time positions—remained healthy despite reported softness in sectoral activity. However, a staffing firm with multiple District locations reported a 30 percent decline in job orders compared with the same period last year. A large majority of nonprofit contacts were either not hiring or hiring only to fill turnover due to revenue declines. Numerous employers noted increased uncertainty about future labor needs, and some were preparing contingency plans for potential layoffs. Employers widely reported that labor availability continued to improve. A Wisconsin contact reported very good attendance at a recent job fair, adding that "there were fewer [candidates] wearing pajamas."
Wages grew moderately. Median wages across a large set of District businesses grew just over 3 percent year over year. Tourism and accommodations employers reported somewhat stronger wage increases, and nonprofits reported weaker wage increases. Multiple construction contacts noted recent union wage increases over 4 percent; but in response to slow construction activity, one remodeling firm reported that it was discounting general labor costs in exchange for booked projects.
Prices
Prices increased moderately overall, at about the same rate of increase as the previous report, while input price pressures intensified. More than a third of District firms increased the prices they charged to customers in April from a month earlier, according to a monthly survey, while more than half reported increased input prices. In their month-ahead outlooks, more than half of firms surveyed anticipated increasing their prices. Some manufacturing contacts reported they were adding surcharges to offset steel and aluminum tariffs. One contact reported adding a surcharge line to invoices but not using it yet. Contacts in other sectors were not putting explicit tariff surcharges in place, but some were adjusting overall prices or planning to do so in the future. Retail fuel prices in District states were flat overall since the last report.
Worker Experience
Results from a survey of workforce development specialists in Minnesota showed that on average it was taking longer for job seekers to be placed into jobs; nearly half said it was taking more than three months. A survey participant shared that job seekers were also encountering less remote work and schedule flexibility from employers. A contact in central Minnesota noted that hiring of immigrants and refugees has slowed. A labor contact in Montana shared that opportunities for public employees have declined, and the contact expected competition for available jobs to intensify.
Consumer Spending
Consumer spending fell modestly. Retail contacts generally reported slower business of late. Several restaurants noted that activity was concentrated on weekends and less busy during the week; patrons were also spending less. Tourism and hospitality firms in Minnesota reported that recent customer traffic, revenue, and profits were all lower compared with a year ago. Some improvement was expected over the coming summer months, but overall sentiment was still slightly pessimistic. Contacts reported—and border-crossing data confirmed—that Canadian travelers to the District continued to decline. A tourism contact in northwestern Montana reported a 10 to 20 percent decline in Canadian visitors. Hotel occupancy and revenue per average room were lower across District states in April compared with a year ago. Vehicle sales were slightly higher overall, but new-vehicle sales fell slightly, according to a large dealership. Sales of recreational and powersport vehicles were lower.
Construction and Real Estate
Construction activity edged slightly lower since the last report. In a recent survey, the share of respondents who reported decreases in activity was higher than those who reported increases. A large share expected activity to decline or remain unchanged at low levels in upcoming months. Increased competition for projects, pervasive high costs, and labor constraints were anticipated to limit activity. For more than half of respondents, expectations turned pessimistic as uncertainty from tariffs crept up. "No one wants to spend money when the future is so uncertain," shared a northern Minnesota firm, adding that price uncertainty was "pushing projects out of budget" and complicating bidding. Recent permits issued were flat for residential projects and higher for commercial projects with some variation across markets.
Commercial real estate was flat overall. Office vacancy rates remained high; leasing was reportedly picking up overall while larger tenants were downsizing their space needs. Industrial and retail vacancy rates remained low thanks to a dearth of new development, and multifamily vacancy was expected to improve as new construction starts have fallen significantly. Residential real estate was lower. Despite rising inventories in many markets, closed sales were widely lower in April compared with a year ago.
Manufacturing
District manufacturing activity increased moderately since the previous report. Manufacturing survey respondents reported a net increase in orders in April from the month prior, but sentiment was notably mixed, as a large share saw their orders decrease. The month-ahead outlook for orders in May was also net positive. An index of regional manufacturing conditions indicated activity increased in Minnesota, North Dakota, and South Dakota in April from the previous month. Some contacts reported an increase in interest from customers in reshoring parts production. Other reports indicated that customers were canceling large orders while they wait to see if tariffs decrease to avoid paying a surcharge.
Agriculture Energy and Natural Resources
District agricultural conditions remained weak overall, but planting season was going well. According to the most recent Ag Credit Survey, 80 percent of respondents reported that farm incomes decreased in the first quarter from a year earlier, as low commodity prices continued to weigh on farm operations. However, corn, soybean, and spring wheat planting progress and emergence in District states as of mid-May were well ahead of average. Persistent drought conditions were causing concern among contacts, particularly in the western portion of the District. Oil and gas exploration activity and production decreased slightly since the previous report.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises (MWBE) was mostly unchanged in recent weeks. A shrinking ability to pass higher costs on to consumers continued to put downward pressure on profit margins. A Minnesota retailer observed that while consumer traffic was up, average spending was down. The downward trend in head count and job openings dipped further among MWBEs. A Wisconsin manufacturer shared that the number of applicants per job opening was higher than in recent years. In Minnesota, a professional services firm was seeing "great candidates [apply, but we] don't have the cashflow to hire." Instead, they were working to implement artificial intelligence to reduce staff and "gain efficiencies."
For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.