Beige Book Report: New York
June 4, 2025
Summary of Economic Activity
Economic activity in the Second District continued to decline modestly amid widespread uncertainty. Employment held steady, though the demand for workers softened and wage growth slowed to a modest pace. Selling price increases remained moderate, but input prices rose strongly with tariff-induced cost increases, especially for manufacturers. Manufacturing activity continued to decline modestly. On balance, consumer spending picked up modestly, with ongoing strong auto sales. Housing markets picked up, though inventory remained exceptionally tight. Capital spending plans declined, and the outlook was quite pessimistic.
Labor Markets
On balance, employment in the region continued to hold steady. Firms in business services and manufacturing saw ongoing declining headcounts, while modest increases were observed among retail, information, and leisure and hospitality establishments.
Demand for workers softened, and in some industries the supply of workers exceeded demand. Contacts noted that attrition was exceptionally low, lessening the need to hire replacements. A software firm in upstate New York reported that despite holding headcount steady, they were substantially reducing employee hours. Some businesses said they were putting hiring on hold until economic uncertainty recedes. A community banker reported receiving large numbers of over-qualified applications for open positions. Some contacts in manufacturing and leisure and hospitality expressed concerns that immigration restrictions would make it difficult to hire the workers they need. Still, there were no mentions of major layoffs.
Wage growth slowed to a modest pace. Firms in the transportation, wholesale, and education and health industries reported a considerable easing in wage growth, while personal services and leisure and hospitality firms said that wage growth remained more substantial. Contacts noted that job switchers were no longer receiving outsized pay increases.
Prices
The pace of selling price increases eased somewhat but remained moderate. However, input prices rose strongly amid rising tariffs, with the price of manufacturing inputs surging to the fastest pace in years. While some firms said they were absorbing tariff-induced cost increases, most reported that they were passing through some or all of such cost increases to their customers by raising prices. An upstate wood mill noted that their ability to raise prices to recoup higher costs was constrained by market forces, significantly reducing profit margins. A heavy construction equipment supplier said they raised prices on goods unaffected by tariffs to enjoy the extra margin before tariffs increased their costs. A number of businesses reported they were no longer stocking goods whose higher prices were becoming infeasible. A florist reported adjusting flower varieties based on rapidly changing costs by source country. Uncertainty about the tariff outlook continued to make it difficult for many firms to set prices. Businesses continued to expect substantial increases in input prices in the months ahead.
Consumer Spending
On balance, consumer spending continued to rise modestly through much of the District. Auto dealers in upstate New York reported that inventories were depleted by ongoing strong sales as customers tried to get ahead of potential tariffs. Used car sales were mostly solid, though inventory availability was sometimes limiting. Restaurant traffic picked up around New York City, especially in Brooklyn. However, ongoing reductions in visits from Canadian tourists contributed to a decline in spending in the North Country as well as a decline in sales at an upstate brewery. An investment advisory firm said that clients had stopped buying services due to heightened uncertainty.
Manufacturing and Distribution
Manufacturing activity continued to decline modestly, though new orders and shipments picked up slightly after declining during the last reporting period. A manufacturer of store displays noted that clients became flighty due to uncertainty and tariffs, leading to postponed and cancelled orders. A producer of retail cooking supplies said that they were ramping up production at their factories outside of China to avoid tariffs. Two manufacturers reported inquiries from clients looking to reshore manufacturing to avoid tariffs. Wholesale and distribution-related firms reported that activity was steady. A shipping contact indicated that there was a significant drop in imports, with some recovery during the later part of the reporting period. Delivery times were unchanged, and inventories increased slightly. Supply availability worsened and is expected to worsen further in the coming months. Manufacturers and wholesale firms planned to reduce capital spending in the months ahead.
Services
Activity in the service sector continued to decline moderately. There were strong declines in the leisure and hospitality and information sectors, and more moderate declines in business and personal services. A regional hospital system noted that reductions in federal funding will disrupt their business. Service sector firms remained unusually pessimistic about the outlook, with plans to reduce capital investment in the months ahead.
Tourism activity in New York City held steady. During the busy college graduation season, hotel occupancy edged higher than last year, and room rates reached a historic high. While attendance was slightly weak at attractions, ticket sales at Broadway theatres remained solid. Still, tourism industry contacts anticipated a decline in international visitors in New York City in the coming year. Winery contacts in the Finger Lakes region of upstate New York reported a significant decline in visits due to fewer Canadian tourists.
Real Estate and Construction
Housing markets picked up across the District as the spring selling season neared its peak, with rising demand amid exceptionally tight inventory. Bidding wars were prevalent in upstate New York and in the suburbs around New York City. Sales were up significantly in the Hamptons since last year, with the higher end of the market driven by cash sales from drawdowns of financial assets. Sales in New York City also increased, with record high prices in some neighborhoods. A housing market expert noted that economic uncertainty had become a more significant issue than high mortgage rates for potential buyers, and there were multiple accounts of buyers withdrawing from bidding and then re-entering later.
Rents in the District continued to rise, with New York City rents reaching historic highs. Rents continued to edge up in upstate New York and northern New Jersey. Rental supply was tight, with Manhattan and Brooklyn vacancy rates at long-time lows.
Commercial real estate markets improved slightly. Vacancy rates in Manhattan's office market continued to decline, and rents picked up in recent weeks following a decline in the previous period. A New York City commercial real estate contact noted that amid increasing demand, the supply of higher quality office space was becoming scarce. Leasing activity was strong. Northern New Jersey's industrial market leveled off after a period of weakness earlier in the year, although industrial vacancy rates remained elevated. Construction activity continued to decline.
Banking and Finance
Activity in the broad finance sector continued to decline modestly. Small-to-medium-sized banks reported that loan demand weakened across the board. One New York banker noted that tariff uncertainty had put deal activity on hold. Credit standards continued to ease and loan interest spreads narrowed. Deposit rates continued to decline. Delinquency rates improved, most notably for commercial mortgages.
Community Perspectives
Non-profits and other community-based organizations continued to face heightened financial pressures. Increasing distress due to federal government cuts to social programs have extended into healthcare, housing, and the arts and humanities. At the same time, non-profits and other community organizations have also faced higher costs of materials due to tariffs. While local governments have stepped in to provide support and relief payments to subcontracting organizations affected by delayed or cancelled federal funding, gaps remain.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.