Beige Book Report: New York
April 23, 2025
Summary of Economic Activity
Economic activity in the Second District contracted modestly as heightened uncertainty weighed on businesses and consumers. Still, employment in the region was steady to up slightly and wages grew moderately. Price increases picked up to the higher end of the moderate range. Manufacturing activity declined modestly. Consumer spending was up modestly in March, though there were signs of a pullback in early April. Housing markets picked up slightly. Many businesses expressed significant concerns that tariffs would reduce supply availability, push up input prices, decrease demand, squeeze profit margins, and hold back investment. Outlooks darkened, with many businesses anticipating declining activity and rising prices in the months ahead.
Labor Markets
On balance, employment in the region was steady to up slightly. Businesses in personal services, information, transportation, and wholesale saw an increase in headcounts, while retailers, leisure and hospitality establishments, and business services firms reported declines.
Demand for workers held steady, though some employers reported pausing hiring amid heightened uncertainty. A New York City area recruiter noted that despite some hesitation, demand for workers in the financial services industry was steady. Contacts at employment agencies in the region reported that labor demand and labor supply remained roughly in balance, though it has generally become easier to find workers. Still, some businesses with more specialized needs continued to struggle to find workers with the right skills. Though there were no mentions of major layoffs, there were scattered signs of headcount reductions at smaller companies.
Wage growth remained moderate. A New Jersey salon reported that training costs were high because workers did not have the proper vocational training, while a New York contact indicated minimum wage increases were hindering hiring of new workers.
Prices
Both selling price and input price increases picked up to the higher end of the moderate range. Food and insurance costs rose noticeably, and price increases for some wholesale and construction materials—such as steel, aluminum, and imported doors—accelerated. Some manufacturers and distributors have begun adding surcharges to account for tariffs on shipments already en route. Still, a regional coffee roaster noted some easing in the price of commodity coffee. Firms dependent on imports expressed concerns about compressed margins and their ability to pass on cost increases to consumers. Contacts anticipated strong increases in input prices in the coming months and expected selling price increases to remain moderate.
Consumer Spending
Consumer spending was up modestly in March, though there were signs of a pullback in early April. Department store contacts reported a small pickup in March on the heels of weak sales amid poor weather in the previous reporting period, but saw signs of weakening consumption in April. A variety of smaller retailers in all corners of District—including food stores, restaurants, and home furnishings stores—reported recent declines in sales, and a diner in upstate New York noted customers were spending less on higher-priced menu items. By contrast, auto dealers in upstate New York reported strong sales in March as customers looked to purchase vehicles before tariffs pushed prices up further. Used car sales were steady, though dealers anticipated a pickup in demand as tariffs raise the prices of new cars.
Manufacturing and Distribution
Manufacturing activity declined modestly, with new orders and shipments edging lower. A regional furniture manufacturer reported a significant reduction in orders, in part due to federal government spending freezes, and a handful of manufacturers reported sharp declines in sales to Canada. By contrast, activity among wholesale and distribution-related firms increased slightly. A shipping industry contact indicated that there was strong demand since the last report, with a significant pulling forward of imports in anticipation of tariffs and other policy changes. Delivery times were unchanged, and supply availability declined slightly but it is expected to worsen considerably in the coming months. Some manufacturers paused capital equipment purchases amid economic uncertainty. Manufacturers turned pessimistic about the outlook.
Services
Activity in the service sector declined moderately. There were particularly sharp declines reported by firms in the leisure and hospitality, business services, and information sectors, while contacts from the education and health and personal services sectors reported more modest declines. A mid-sized IT service firm noted the loss of several contracts with Canadian companies. The outlook for service sector firms worsened noticeably, with contacts anticipating a sharp decline in activity in the coming months. Service sector firms reported a major pullback in planned investment.
Tourism activity in New York City was steady, with solid ticket sales at Broadway theatres. Hotel rates and occupancy rose slightly compared to the same time last year. However, a New York City hotel owner reported a falloff in international reservations, and contacts in upstate New York near the border saw declining visits from Canadians. Looking ahead, a tourism industry expert anticipated further declines in international visitors.
Real Estate and Construction
The housing market picked up slightly as the spring selling season got underway. Supply remained the limiting factor, with ongoing exceptionally low inventory in upstate New York and the New York City suburbs, particularly Long Island. There was a small increase in new listings in recent months, and some new construction added to inventory in upstate New York. Demand remained solid and picked up for the spring selling season, pushing prices higher, and bidding wars continued. New York City's housing market remained solid, despite some pullback from high-income buyers rattled by financial market volatility. Yet, a New York City real estate contact expressed concern that with mortgage rates rising in recent weeks, buyers and sellers may retreat to the sidelines.
Rents have stabilized at a high level in upstate New York, while rents in New York City continued to rise. With mortgage rates edging higher and heightened uncertainty, potential buyers have pushed up demand for rentals.
Commercial real estate markets held steady. Vacancy rates in Manhattan's office market have declined, and leasing activity was stronger in March. Still, asking rents continued to decline, as the ongoing preference for newer, higher-quality property has shifted the balance of space on the market. Midtown Manhattan has fared better than other business districts, as proximity to transit remained attractive. Northern New Jersey's industrial market softened, as some activity stalled due to the uncertainty about tariffs and consumer demand. Construction activity declined, amid rising material prices and heightened uncertainty.
Banking and Finance
Activity in the broad finance sector continued to weaken modestly this reporting period. Small-to-medium-sized banks reported that demand edged down for business loans and commercial mortgages, but declined more sharply for consumer loans and residential mortgages, as well as refinances. A senior loan officer at a regional bank in New York noted that uncertainty was tempering loan demand. Most contacts reported that credit standards had eased, while delinquency rates improved. Deposit rates continued to decline.
Community Perspectives
Reductions in federal grants and subsidies have led to gaps in services and financial assistance to community members, with organizations having difficulty obtaining financing to help fill these gaps. Local food banks that rely on federal funding have reported reductions in personnel and programs. Contacts at non-profits and other community-based organizations expressed significant concern about the future of federal funding and services support, creating challenges in staffing, strategy, and planning.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.