The latest Federal Reserve Beige Book indicates the U.S. economy maintained overall stability in early 2026, though persistent inflation, a slowing labor market, and policy uncertainty are emerging as new risks. Compiled from economic observations by businesses and industries nationwide and based on surveys conducted by the 12 regional Federal Reserve Banks up to February 23, the report does not reflect the impact of recent major events, such as a Supreme Court ruling overturning certain tariff policies or the latest outbreak of conflict in the Middle East. The report shows the U.S. economy demonstrated relatively sound fundamentals at the start of the year, but businesses remain cautious about the future outlook. Firms surveyed by the New York Fed noted a rebound in consumer spending, although many households are still cutting back on major purchases due to uncertainty. Manufacturers in the Philadelphia region reported that unclear economic prospects and a recent winter storm impacting the Northeast continue to pose challenges to production and orders. The Richmond Fed observed that in the current uncertain economic environment, a growing number of employees are choosing to remain in their current positions rather than seek new job opportunities. Meanwhile, logistics firms, while perceiving a slight reduction in uncertainty compared to before, are still closely monitoring demand changes and tightly controlling inventory, purchasing only goods with confirmed sales.

Regarding employment, the Beige Book shows that most regions experienced generally stable employment levels in early 2026, but the labor market lacked significant dynamism. Many businesses reported that hiring plans were constrained due to weak demand and rising operational costs. A Dallas Fed survey found that most firms, in both the services and manufacturing sectors, currently have no plans to expand hiring. On the U.S. West Coast, some companies are reducing their workforce through layoffs or natural attrition. While there is no widespread evidence yet that artificial intelligence is significantly reducing labor demand, some firms are beginning to explore using automation and AI to enhance efficiency. The St. Louis Fed noted that a manufacturer in Memphis is shifting its capital budget towards automated equipment, as persistent hiring difficulties make robotics and industrial AI a reliable way to maintain capacity and quality.

The report also mentioned that heightened immigration enforcement in the Minneapolis area has had a noticeable impact on the local economy. A landscaping company stated that during the enforcement actions, many employees chose to resign or stop coming to work. The company attempted to hire replacements but found it nearly impossible to secure suitable labor. Concurrently, enrollment in a workforce program providing English training for new immigrants fell by 43%. Local consumer activity has also been affected. Businesses in retail, hospitality, and leisure reported decreased demand, with firms in the Twin Cities area widely attributing this to a tense atmosphere stemming from the immigration enforcement. A construction company also indicated that the enforcement actions impacted its project timelines, although cold weather was also a factor.

Inflation remains a widespread concern for businesses. The Beige Book indicates that all 12 Fed districts reported price increases, with eight districts experiencing moderate price growth and four seeing slight increases. Firms commonly cited rising costs for insurance, energy, and raw materials, while tariffs are also driving up production costs. A food business in the New York area reported that some companies are responding to higher costs by keeping prices steady but reducing product package sizes. Another company stated that due to rising costs, it had to secure a new line of credit to maintain operations. A business in the Chicago area said it plans to pass more tariff costs onto customers this year. Last year, the company shared tariff costs with customers, but this year it will require buyers to bear the full expense. The Dallas Fed noted that price increases for services were relatively moderate, while price hikes for physical goods were more pronounced. In contrast, the Atlanta Fed observed relatively subdued inflationary pressures, with prices largely flat or increasing only modestly, alongside growing consumer resistance to price increases.

Overall, the Beige Book reflects a U.S. economy that remained sound in early 2026, but with uneven growth momentum. Businesses widely face cost pressures and policy uncertainty, and while the labor market is stable, it lacks vitality, leaving the future economic outlook filled with variables.