November 26, 2025
Summary of Economic Activity
Economic activity in the Second District declined modestly this reporting period. On balance, employment fell slightly and wage growth remained modest, with some layoffs occurring at major employers in the region. The pace of selling price increases eased slightly, but remained moderate, even as input prices continued to rise strongly. Manufacturing activity increased at a moderate pace, continuing a pickup from the previous period. Consumer spending declined slightly, though higher-end retail spending remained resilient. Housing markets were little changed, with demand holding solid amid limited supply. Though loan demand declined overall, demand for residential mortgages increased slightly. Businesses did not expect much improvement in the months ahead.
Labor Markets
On balance, employment declined slightly during the reporting period. Most sectors reported lower head counts, with more substantial declines in construction, education, and health care. However, employment was flat in the wholesale trade and finance sectors, and employment increased in the personal services and manufacturing sectors. Meanwhile, hours worked increased at small- and medium-sized businesses in the District as firms were reluctant to add head counts to meet demand.
Demand for workers largely remained subdued, with labor supply continuing to outpace labor demand. Contacts reported that it has consistently been easier to find workers. Still, demand for workers in finance and technology, especially those with AI skills, remained extremely strong, with firms having difficulty filling such positions. A contact in upstate New York's tech sector reported that attracting and retaining these highly skilled professionals had become increasingly difficult, citing competition from larger industry players that have been able to offer more lucrative compensation packages. Meanwhile, AI is reportedly reducing the demand for workers in certain roles, such as customer service, especially at larger companies. There have been some layoffs by major employers in the District, though small-to-medium sized businesses have continued to show resilience.
On balance, wage growth slowed slightly and remained modest. Firms in construction, education, and health care reported more substantial increases, while wage growth stalled in the information and finance sectors. Contacts anticipated a pick-up in wage growth in the coming months.
Prices
The pace of price increases eased slightly but remained elevated. Despite this slowing, selling price increases remained moderate amid strong input price increases. Many firms continued to report that tariffs were driving up their costs and selling prices. A consumer-facing firm dependent on imported goods filed bankruptcy while a brass machining company said it may go out of business, both a consequence of tariffs. Rising electricity costs in New York State continued to pose significant challenges for a number of businesses. An owner of several restaurants in New Jersey noted that food prices, particularly for beef, had risen to all-time highs. A New York City area contact reported that the combination of congestion pricing, property taxes, and other regulatory expenses were a significant burden on its business. Some contacts reported sharp jumps in health insurance premiums. Looking ahead, firms expected pricing pressures to remain significant.
Consumer Spending
Consumer spending declined slightly, though reports were mixed. While smaller retailers reported sharp declines, higher-end retail spending remained resilient. A New Jersey-based café noted that sales had been particularly weak, with the average order size shrinking, and a small restaurant chain reported declining sales. Still, a department store reported that sales have remained strong, especially for bedding as well as fine jewelry and watches. An upstate New York retailer near the Canadian border reported weak sales due to declining visits from Canadian shoppers. Auto dealers in upstate New York reported that sales of new vehicles declined in October in part due to weak electric vehicle sales as buyers had rushed forward purchases in September before federal rebates expired. Inventory remained at a healthy level with most models available. Used car sales were solid.
Manufacturing and Distribution
Manufacturing activity increased moderately, continuing a pickup from the previous reporting period. Both new orders and shipments increased moderately. However, manufacturers continued to face headwinds from uncertainty, tariffs, and shifting international sentiment. A high-tech manufacturer noted declining demand for American exports from Asia, while another manufacturer noted an uptick in demand due to reshoring. Capital spending plans picked up after a period of weakness. Supply availability worsened somewhat, but delivery times were little changed. Activity declined among wholesale and distribution firms, though a shipping industry contact noted that activity remained exceptionally strong. Manufacturers expected conditions to improve modestly in the months ahead.
Services
Activity in the service sector continued to decline moderately. Businesses in most sectors reported shrinking activity, though firms in business services, information, and leisure and hospitality reported particularly steep declines, while businesses in personal services, education, and health reported only modest slowing.
New York City's tourism sector was stable, with hotel bookings steady at high levels and forward bookings looking positive. Attendance at some attractions was weak while others saw a pickup. Although Canadian visitation has trended down, Brazilian tourism has grown as winter is a popular time for Brazilians to visit the City. The government shutdown had a negligible impact on New York City's tourism industry, as government hotel bookings were already relatively low, and travel was generally not disrupted.
Real Estate and Construction
Housing markets were little changed across the District, with solid demand and limited supply. Inventory in New York City's suburbs has grown slightly but remains at about half of normal levels. Price increases eased a bit at the lower end of the New York City market, where borrowers more dependent on financing stood on the sidelines waiting for relief in mortgage rates. Still, the high-end housing market remained strong, as wealthy buyers with access to cash and alternative financing were active in New York City, its suburbs, and the Hamptons.
Rents held steady at a very high level in New York City, while leasing activity declined a bit. With ongoing strong demand, rental markets are expected to remain steady.
Commercial real estate markets continue to improve. New York City's office market remained a bright spot and continued to recover, with vacancies declining. Many tenants moved forward signing leases following a brief pause toward the end of the last reporting period. A contact in commercial real estate noted that progress has been made converting office buildings into residential space, increasing New York City's housing supply. Still, on the whole, construction activity continued to decline sharply across the District.
Banking and Finance
Activity in the broad finance sector expanded slightly. However, small-to-medium sized banks reported that loan demand declined since the previous reporting period, with the exception of residential mortgages where demand increased slightly. Credit standards were mostly unchanged, though one contact reported tighter credit standards for business loans and commercial mortgages. Deposit rates continued to move lower. Delinquencies improved for all loan types but remain elevated.
Community Perspectives
Community organizations administering food and nutrition programs reported rising food insecurity, as the number of individuals relying on food assistance continued to grow. Rising food costs, coupled with delays in processing SNAP benefits due to the government shutdown, weighed heavily on older adults, families with children, and the disabled. Food pantries across the District struggled to keep up with record demand amid reduced donations. State governments and food distribution organizations have responded with contingency plans and stopgap measures to support program continuity.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.