The Beige Book

The Beige Book is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.

Boston (First District) Beige Book Report, September 3, 2025

Summary of Economic Activity

Economic activity expanded slightly overall, with mixed results across sectors. Prices increased at a modest pace, as did wages. Consumer spending was roughly flat for retailers and restaurants, and tourism activity softened a bit. Manufacturing sales rose modestly on average, with strength in AI-related products. Staffing services activity increased slightly, driven by demand for temporary and administrative roles. Commercial real estate activity expanded but was still considered weak. Residential real estate activity rose at a modest pace as inventory growth helped to boost home sales. The outlook remained cautiously optimistic among manufacturing, staffing, and residential real estate contacts. Sentiment, however, remained pessimistic among commercial real estate contacts and became more guarded among retail and tourism contacts.

Labor Markets

Employment was down slightly overall, and wage growth was modest. Manufacturing employment contracted a bit, although most manufacturers maintained steady headcounts. Restaurant employment decreased modestly from a year earlier, reflecting a reduction in the number of establishments. Retail and hospitality headcounts were roughly unchanged. Staffing contacts described employment and labor demand as mostly flat from the previous quarter, aside from a modest uptick in hiring in the accounting, finance, and legal professions. According to those same contacts, some firms remained hesitant to make major hiring decisions, while others started to hire again after a pause, but with a preference for temporary positions. Firms remained highly selective, increasing the time to fill vacancies, while layoffs were unchanged or down slightly. Labor supply improved on balance. For white-collar roles, job candidates became less selective in accepting offers but maintained a preference for remote and hybrid work. Among retail and restaurant contacts, wage pressures were more muted than in recent years. One retailer implemented moderate merit wage increases. Manufacturers enacted modest wage increases on average, though one manufacturer postponed its annual wage increase to January 2026. One manufacturer planned moderate increases in hiring moving forward, but otherwise no major changes in employment were expected.

Prices

Prices increased modestly on average. A clothing retailer marked up its prices by 10 to 15 percent on about half of its items, citing tariffs as the reason. Other retailers raised their prices only slightly, however, with one home furnishings seller noting that manufacturers had absorbed a greater share of tariffs than anticipated. Among restaurant contacts, menu prices increased slightly in response to increases in wholesale food prices, fuel prices, and insurance rates, although some inputs, such as dairy products, experienced price declines from a year earlier. Hotel prices rose modestly despite decreased occupancy rates. Among manufacturers, output prices increased modestly on average, driven in most cases by tariffs on inputs; however, price increases did not fully match cost increases, as firms were concerned about losing business. At least one manufacturer tried to mitigate the impact of tariffs by adjusting its supply chains. A few contacts expected further cost and price increases in the coming months, but most did not comment on the outlook for prices.

Retail and Tourism

First District retail and restaurant sales were roughly flat in recent months, while tourism activity softened slightly. A Massachusetts restaurant industry contact said that sales were generally flat compared with last year, with Cape Cod establishments reporting seasonally typical results despite a rainy start to the summer. A clothing retailer experienced flat sales on average in recent months. A home goods retailer noted continued softness throughout the sector but experienced a moderate increase in revenues as a result of gaining market share. A discount retailer reported a modest decline in sales, which were hurt by reduced cross-border activity with Canada. Airline passenger traffic through Boston was flat in recent months, and, relative to 2024, there was a slight decline in domestic passengers and an uptick in international passengers. Hotel occupancy in Greater Boston declined modestly in recent months. Several contacts perceived that the combination of tariffs and historically high uncertainty threatened to dampen consumer spending moving forward.

Manufacturing and Related Services

On average, manufacturing sales rose modestly from the previous quarter, although contacts reported results that ranged from moderate declines in sales to robust gains. The firm that experienced a decline in sales said that the timing of shipments was mostly to blame, as the underlying demand, especially for their AI-related products, remained quite strong. The contact reporting robust growth attributed it to a rebound in demand for digital data storage products, after clients depleted their previously large inventories of such goods. Capital expenditures were largely unchanged. The outlook called for modest to moderate sales growth going forward, with AI-related demand contributing to increased optimism for some firms.

Staffing Services

Staffing services contacts reported a slight increase in activity from the previous quarter overall, although some firms described labor demand as flat. Compared with one year earlier, total placements increased substantially for one firm, especially for temporary roles, and demand fell slightly at another firm for the same period. Billing rates were unchanged, while pay rates were up slightly. Some contacts noted significant increases in health insurance costs and employee onboarding costs. Staffing firms became somewhat more optimistic for their own businesses, and one perceived that uncertainty was waning. One contact anticipated significant growth in the overall staffing industry in New England in the coming year, linked to increased demand for administrative, engineering, and light industrial or manufacturing roles.

Commercial Real Estate

Commercial real estate activity expanded slightly, although contacts continued to view the market as weak overall. Retail properties experienced moderate rent growth, while rents were mostly unchanged in other sectors. Office leasing activity increased slightly further, driven by large companies, but contacts emphasized that the improvements were minimal. One contact pointed out that Boston's office market, which typically tracks New York's in broad terms, was not experiencing a resurgence in office demand on par with that seen recently in New York. New construction was limited, despite pent-up demand for multifamily housing and retail properties. Industrial leasing activity was quite sluggish, and the overall level was down from last year. Multifamily leasing and sales were stable, but rents were flat. The outlook for commercial real estate activity remained pessimistic on balance, although one contact became somewhat more optimistic, and another said that uncertainty was waning. Contacts said that high interest rates continued to deter real estate activity and that tariffs had weakened the outlook for overall economic growth.

Residential Real Estate

Single-family home sales increased moderately from a year earlier (as of June or July, depending on the respondent), buoyed by a combination of rising inventories and healthy, stable demand. Condominium sales varied from steep declines to strong increases depending on the state but rose slightly on average. Single-family home prices increased by moderate to above-average margins in all New England states except Vermont, which posted moderate price declines, and Connecticut, which furnished no data. Condominium price changes varied widely across markets. Contacts reported moderate-to-large increases in home inventories, especially for condominiums. The rise in single-family inventories was reportedly driven mainly by existing homes, whereas some of the rise in condominium inventories represented new construction. Despite recent inventory growth, contacts described supply as still tight in relation to a balanced market. Contacts remained optimistic that rising inventories would continue to support healthy sales moving forward.

For more information about District economic conditions visit: www.bostonfed.org/regional-economy.

All Beige Book content going back to 1996 can be found at the Board of Governors website.

The Minneapolis Fed hosts the Beige Book archives by district, going back to 1970.