U.S. Fed sees more firms reducing staff on economic uncertainty

More U.S. employers are reducing headcount on weaker demand and heightened economic uncertainty, the U.S. Federal Reserve said Wednesday, adding in a report that prices have climbed in recent weeks as well.

But overall, the U.S. central bank's "Beige Book" survey of conditions showed that economic activity changed little in recent weeks, even as "consumer spending, particularly on retail goods, inched down."

A day earlier, Fed Chair Jerome Powell said in a speech in Philadelphia that a sharp slowdown in hiring poses a growing risk to the U.S. economy, a sign that the Fed will likely cut its key interest rate twice more this year.

Fed officials at that meeting also forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for mortgages, car loans, and business loans.

The Fed made its first interest rate cut this year in September as the key employment market weakened, but officials are proceeding cautiously as they balance risks to inflation as well.

Since returning to the White House this year, U.S. President Donald Trump has slapped wide-ranging tariffs on trading partners, fueling worries among economists that these could cause consumer prices to rise.

On Wednesday, the Fed said that business costs in some districts rose at a quicker pace recently due to higher import prices and steeper costs of services like insurance and health care.

"Tariff-induced input cost increases were reported across many districts, but the extent of those higher costs passing through to final prices varied," the Fed added.

For now, many expect that elevated uncertainty will bog down economic activity, the Fed said.

"In most districts, more employers reported lowering head counts through layoffs and attrition," it added.

The report said the Fed's contacts cited "weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies."

The labor supply in sectors like agriculture, construction and manufacturing were also "reportedly strained" in some districts due to changes in immigration policies, the Fed said.