Beige Book Report: Minneapolis
April 23, 2025
Summary of Economic Activity
Economic activity in the Ninth District edged lower across most sectors since the last report. Employment decreased and labor demand continued trending down. Wage pressure grew modestly, while prices moved moderately upward. Consumer spending fell slightly with noted exceptions, particularly on vehicle sales. Construction activity fell overall, reflecting elevated uncertainty. Commercial real estate was mostly flat, and sales of residential units edged lower. Manufacturing activity increased modestly, though sentiment was mixed. Agricultural conditions remained weak.
Labor Markets
Employment was down slightly since the last report, and labor demand cooled notably. More firms reported a decrease in headcount compared with those reporting an increase. A large staffing firm with multiple offices in the District reported a drop in clients and job orders on a monthly and year-over-year basis. A second, large staffing firm reported that "customers have slowed down in hiring." Multiple Minnesota contacts said businesses have implemented hiring freezes and temporary layoffs and have been cutting hours. Still, a Wisconsin workforce contact said, "While sentiment has been somewhat negative, we still have plenty of job openings that need to be filled." Labor availability continued to improve. A long-term care provider reported "a huge increase" in applications it normally receives for open jobs, and a health care provider noted it was "flooded with applications for IT positions."
Wage pressure grew modestly but softened from levels earlier in the year. A survey found that the share of contacts reporting wage increases fell noticeably in March for the second consecutive month. A staffing company reported that year-over-year wage increases for the majority of job placements were running just over two percent. A central Minnesota contact reported that advertised wages for some entry-level jobs were declining. One workforce contact noted that "employers appear to have gained more leverage in wage negotiations."
Prices
Prices increased moderately overall, with greater pressure on wholesale prices. More than a third of District firms increased the prices they charged to customers in March from a month earlier, according to a monthly survey, while more than half reported increased input prices. Contacts in manufacturing and construction reported that they saw raw materials prices increase in anticipation of tariffs, particularly for steel and aluminum products. "Steel prices are surging faster than they did during the 2019-2021 period when we experienced record-setting steel prices," commented a metal fabricator. Some contacts reported placing surcharges on products using metal inputs, while a few reported increasing prices of other outputs to compensate, and others saw declining margins. Retail fuel prices increased modestly in most District states since the last report.
Worker Experience
Reports from labor and workforce development contacts reflected ongoing challenges for workers and job seekers, topped with added uncertainty from federal policies. Some contacts feared that tariffs and federal spending cutbacks would hurt a labor market that, while softening, remained in good shape. In Montana, a building trades labor contact attributed the growing number of "people on the bench" to the slowdown of federally funded projects. Another labor contact in Michigan's Upper Peninsula warned that "the labor market door is about to slam shut... and consumer confidence and spending is going to plunge." Contacts also highlighted particular stress on Indian Country due to "frozen federal funding," while immigrant workers in a range of occupations were feeling uncertain about their future.
Consumer Spending
Consumer spending fell slightly overall. Retail contacts were split on recent sales trends. Recent credit card transactions in the District showed slower spending compared with a month earlier. Tourism contacts also reported declines in Canadian travelers and related spending; a North Dakota retailer saw a "deep impact" starting in mid-February, pushing first-quarter revenues down seven percent. However, vehicle sales rose across the District, possibly a short-term effect as people "buy now to save... money from the future tariffs," according to one District dealership. Numerous contacts noted a more cautious, cost-conscious consumer. Several bankers in Montana said consumer loan activity was slow because people were nervous to acquire debt. A manufacturer of consumer goods said, "It is extremely difficult to predict consumer behavior now and for the rest of the year."
Construction and Real Estate
Construction fell since the last report. While some firms reported that activity was picking up with spring, a larger share reported a decline in activity, most often citing economic uncertainty. A Minnesota heating and cooling firm said it was "bracing for an unpredictable year." Numerous contacts, particularly in architecture and engineering, reported delays in projects moving forward. A Minnesota firm said, "New projects have dried up completely in the first quarter.... Uncertainty and chaos at the federal level has frozen pretty much all activity." Another said that "clients are hesitant to proceed with design until some sort of certainty and predictability comes back." Preliminary data on housing permits suggested relatively stable activity in March.
Commercial real estate was flat overall. Office vacancy remained high, but demand grew among smaller tenants, leading to modest improvements in space absorption. Industrial, retail, and multifamily vacancy rates were stable, helped by generally slow activity in new construction in those sectors. Residential real estate was widely lower; March home sales fell among most markets with available data.
Manufacturing
District manufacturing activity increased modestly overall since the previous report, though sentiment was mixed among contacts; some reported negative impacts from tariffs or expected tariffs. More than half of manufacturers responding to a monthly business conditions survey reported an increase in orders in March from a month earlier. Some contacts noted a bump in orders due to customers seeking to build inventories ahead of expected price increases. An index of regional manufacturing conditions indicated activity increased in Minnesota, North Dakota, and South Dakota in March from the previous month. Some producers of construction input reported cancellation of orders amid uncertainty about the outlook.
Agriculture Energy and Natural Resources
District agricultural conditions remained weak heading into planting season. Grain producers continued to struggle due to low commodity prices, while cattle operations were stronger. Industry sources were concerned about widespread drought conditions because, as one contact noted, "liquidity on balance sheets is gone and another bad year would be very difficult to survive for most farmers." District oil and gas exploration activity was unchanged since the previous report. Operations were idled at two District iron ore mines due to overaccumulation of inventory amid decreased steel demand.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises (MWBEs) fell slightly, with expectations of further softening over the coming weeks. Inventory levels rose among most contacts. A manufacturing company in Minnesota said it was "pre-buying aluminum in anticipation to tariffs." The majority of contacts reported higher nonlabor input prices and thinner profit margins. Many expected their own final prices to increase in the foreseeable future. A retailer in North Dakota expressed concerns about the effects of tariffs on prices and supply. Job openings trended down, and headcount remained unchanged on balance. Over half of contacts described the first three months of 2025 as "worse than expected." A Minnesota manufacturer said, "We've been in business 12 years, and [this quarter] was like our first or second year."
For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.