Federal Reserve Bank of St. Louis Reports Modest Economic Gains

The latest report from the Federal Reserve Bank of St. Louis paints a picture of resilience mixed with caution. Economic activity has shown a modest increase recently, a shift largely attributed to the conclusion of the government shutdown and a surge in late-holiday sales.

For business owners, investors, and residents tracking the STL economy, this update offers critical signals about where we stand. From stagnant employment levels to shifting price pressures, understanding these nuances is key to navigating the year ahead. In this breakdown, we analyze the specific statistics and qualitative feedback provided in the region’s latest economic assessment.

St. Louis Fed Highlights Labor Market Stagnation

One of the most significant takeaways from the report is the state of the job market. According to the St. Louis Fed, employment levels have remained largely unchanged since the previous reporting period.

Unlike the hiring booms of previous years, contacts across the district report little demand for additional labor. Job openings in mid-December were actually slightly lower than they were a year prior.

Specific Industry Responses to Hiring

Different sectors are reacting to this stagnation in unique ways:

• Transportation: A local truck dealer is considering a freeze on hiring for open positions, though they noted they could ramp up quickly if demand returns.
• Retail: A major food retailer anticipates that hiring in 2026 will be strictly to replace departing workers rather than to expand their workforce.
• Healthcare: Providers noted a positive trend where voluntary employee turnover has continued to decline.

However, it isn’t quiet everywhere. Construction contacts reported ongoing struggles to attract labor. They cite an aging workforce and a reduction in immigrant workers as primary barriers to filling roles.

Wage Growth Trends in the STL Economy

Despite the hiring plateau, wage growth remains moderate. For instance, a truck dealer reported budgeting for a 4 percent increase in labor costs for 2026. Conversely, agribusiness contacts expect some relief on wages, anticipating that H2A regulated wages may decline in the coming year.

![Image description: Construction workers reviewing plans on a job site. Alt text: Construction workers navigating labor shortages reported by the St. Louis Fed]

Price Pressures and Consumer Behavior

Inflation and pricing strategies remain hot topics for the Federal Reserve Bank of St. Louis. Prices have continued to increase moderately, but the underlying causes vary by industry.

The Impact of Tariffs and Competition

Auto and truck dealers are feeling the heat from import tariffs. Interestingly, manufacturers are currently absorbing these costs by reducing their profit margins rather than passing the full burden onto dealers immediately.

On the consumer side, shoppers are becoming savvier. One contact noted that customers are actively comparing prices across retailers and online channels before committing to purchases. This price sensitivity is forcing businesses to be strategic. A manufacturer noted they refuse to change prices mid-year to maintain consistency across advertising platforms.

Struggles in the Service Sector

The restaurant industry faces a particularly tough challenge. Contacts report an inability to pass higher costs along to customers, leading to noticeable financial strain. In contrast, the travel sector offers some relief to consumers, with a district airport contact reporting that airline fares have ranged from stable to falling over the past month.

Manufacturing and Agriculture Updates

Manufacturing activity has shown slight improvement, a positive sign for the STL economy. A December survey of supply chain managers indicated that activity ticked up in both Arkansas and Missouri.

However, the sector faces headwinds:

• Inventory Issues: Contacts reported ongoing weakness in new orders and production, largely because inventories remain elevated.
• Capital Spending: A St. Louis area manufacturing firm expects to reduce its capital spending budget in 2026 following major additions in 2025.
• Reshoring Wins: In a bright spot, plastics manufacturers reported stronger demand, attributed to reshoring efforts driven by import tariffs.

Agriculture conditions, conversely, remain strained. The supply of row crops currently outweighs demand, creating pressure on the sector.

Consumer Spending Surprises

Consumer spending increased moderately, buoyed by stronger-than-expected sales late in the holiday season. Retailers reported that holiday purchases skewed later than usual, as customers held out for deeper discounts.

Promotions drove much of this late activity. A logistics contact noted that the “day after Christmas” was one of the busiest days of the year. Looking ahead, retailers are optimistic about 2026 calendar timing. For example, Valentine’s Day falling on a Saturday is expected to generate stronger sales than the previous year.

For more on how policy shifts impact local commerce, read our analysis on Economic Policy Trends.

Conclusion

The Federal Reserve Bank of St. Louis report suggests an economy that is growing, albeit slowly and cautiously. With labor demand softening and consumers hunting for bargains, businesses must remain agile.

If you are looking for more detailed economic data, we suggest visiting the Federal Reserve’s official Beige Book archive.

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