San Francisco Fed releases Twelfth District Beige Book for April 2025

Significant economic activity slowdown was observed in the Twelfth District during the mid-February through March reporting period, with a widespread impact across various industries and regions. Employment levels experienced a decline, and employers in different sectors and geographies reported recent and planned layoffs. While wages saw slight growth, overall prices rose modestly, with heightened price pressures noted for imported goods and materials.

Both households and firms exhibited more cautious spending behavior, leading to weakened demand for retail and services. Manufacturing activity experienced a slight decrease, while conditions in agriculture and resource-related sectors remained mostly unchanged. Residential and commercial real estate markets softened to some extent, and lending activity remained stable. Demand for community support services remained high, reflecting the challenging economic environment.

The labor market witnessed a slight decrease in employment levels, with many employers reporting recent and anticipated layoffs. Reasons cited included lower demand from private and public sector customers, as well as cost-saving measures. While qualified applicants were generally easier to attract, some roles, such as engineers and skilled trades workers, faced challenges. A notable hospitality services provider planned to hire fewer seasonal workers due to reduced demand and policy uncertainties.

Wage growth continued at a slight pace, although negotiation opportunities for starting pay were limited for prospective employees. State and local minimum wage mandates exerted upward pressure on wages, particularly in the service sector, notably in California. Prices rose modestly, with increasing pressures on imported goods and raw materials like aluminum, steel, and lumber. Services costs, especially in insurance, healthcare, and utilities, remained elevated, with some businesses lowering prices to sustain customer base amid softening demand.

Community support services providers noted deteriorating conditions, driven by high demand for services like housing and food assistance. Workforce and economic development services focused on sectors with strong demand, amidst falling funding from public and private sources. Retail sales saw a modest decline, with discretionary spending decreasing notably for big-ticket items and nonessential groceries. Essential goods demand remained stable, and households adopted cautious spending behaviors in anticipation of labor market downturns.

Consumer and business services saw a moderate weakening in demand, particularly in air travel, hotels, and entertainment events. Manufacturing conditions experienced a slight decrease, while limited progress was seen in residential and commercial real estate markets. Overall, sentiment and economic outlook deteriorated significantly, with expectations of a notable downturn in labor market conditions in the coming months.