Fed Beige Book Finds Modest Growth Led by Data Centers

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The Fed Beige Book found US economic activity increased modestly over the prior two months, with a positive but mixed outlook.

Data-center and defense orders supported manufacturing, while data-center construction tightened labor availability in some districts.

Consumer price sensitivity remained elevated as prices accelerated moderately and several districts reported pressure on household budgets.

US economic activity improved modestly over the prior two months, with data-center demand emerging as a recurring growth driver. Bloomberg's coverage of the latest Fed Beige Book highlights stronger manufacturing activity across most districts, slight employment growth, and a positive overall outlook. The survey also showed mixed sector sentiment as businesses weighed energy costs, geopolitics, and consumer price sensitivity.

The Beige Book included 25 references to data centers and 19 to artificial intelligence. Manufacturing grew across most Federal Reserve districts, supported by defense and data-center orders. Cleveland contacts described robust manufactured-goods demand driven by both sectors.

Construction markets also felt the effect. In the Richmond district, data-center building activity increased competition for labor. One Maryland contractor implemented a 35% pay increase to retain workers. That pressure shows how large infrastructure projects can influence staffing costs beyond the facilities themselves.

Demand tied to the sector was strong enough to shape local operating conditions. Richmond-area contractors reported competition from non-local companies pursuing data-center work. In Cleveland, manufacturers linked growing orders directly to data centers and defense spending.

Employment rose slightly nationwide, but hiring conditions varied by sector. Healthy labor demand appeared most often in manufacturing, construction, and some services. Retail and hospitality contacts reported falling labor demand.

The Fed Beige Book continues to show uneven growth across districts even when headline activity improves.

Technology hiring was similarly mixed. New York contacts said AI engineers remained difficult to find, while demand weakened for entry-level technology and administrative roles. A Philadelphia banking contact reduced back-office hiring through automation but continued prioritizing customer-facing and revenue-producing jobs.