Economic activity in the western United States was "somewhat muted but largely stable" during the mid-May through June period, according to the Federal Reserve Bank of San Francisco's Beige Book report released in July 2026. The report, which covers the Twelfth District spanning Alaska to Hawaii and throughout the Mountain West, found that while employment levels held steady and manufacturing ticked up modestly, nonprofit organizations faced severe funding pressures that forced staffing cuts and service reductions. Contacts reported a weak economic outlook overall, though sentiment improved slightly from prior periods.
Employment levels remained largely unchanged as employers maintained current head counts and hired selectively only to replace attrition or meet specific business needs. The report noted fewer announced or planned layoffs compared to earlier reporting periods, with turnover rates staying low and most open roles easy to fill, particularly entry-level positions. Wages rose at a slight pace, with pay adjustments generally in line with historical averages, though wage pressures emerged in engineering and skilled trades. Prices increased at a moderate pace, driven by elevated energy costs that pushed up transportation and freight expenses, along with cost pressures for tariff-impacted goods like metals and electronic components, animal protein, fertilizer, petrochemicals, apparel, insurance, and technology services. Retail sales ticked down slightly, with demand weakening for specialty and big-ticket discretionary items as price-sensitive consumers traded down to lower-cost alternatives. Demand for consumer and business services slowed somewhat on net, with leisure travel and local spending on restaurants, hotels, and entertainment declining modestly in several markets, though business travel remained robust.
The report finds that community support organizations faced strained conditions, with demand for housing and food assistance remaining elevated while several contacts reported "signs of heightened household financial stress, including faster spending of tax refunds and rising credit card balances." Nonprofit organizations continued to face funding issues, pushing some to reduce staffing or cut back on services offered. In agriculture, a Mountain West contact described the sector in the region as "undergoing a recession, with many farmers experiencing their second or third consecutive year of operational losses." The report notes that firms continued to invest in AI technologies to drive productivity improvements and assess employees' ability to integrate AI agents into workflows.
The challenges facing different sectors stemmed from distinct pressures that varied widely across the district. Agricultural producers struggled with elevated production costs, low commodity crop prices, and acute drought conditions throughout the Mountain West and parts of Oregon, while exports of cherries, apples, hay, and grains to Asian markets declined. Manufacturers faced widespread challenges related to supply chain disruptions and commodity prices, with some indicating that recent tariff adjustments on steel, aluminum, and copper pushed clients to reassess planned investment projects. The ability of firms to pass elevated costs to consumers varied significantly by sector and geography—several retailers raised prices in recent weeks to reflect increased costs, while some consumer services contacts noted customer pushback on higher prices. In residential real estate, demand for single-family homes remained solid but was dampened by recent upward movement in mortgage rates, while the supply of multifamily rental units in urban markets continued to outpace demand, putting downward pressure on rental rates.
Looking ahead, the report indicates credit quality remained generally sound, though contacts reported emerging concerns for small businesses and an increased level of substandard loans, with credit conditions in agriculture particularly weak. Residential construction activity was steady overall, but reports on financing for new projects were mixed. Some retailers expressed concerns about the impact of ongoing global supply chain disruptions on their ability to source products in the second half of the year. Despite the weak economic outlook, the slight improvement in sentiment from prior periods and robust business travel demand suggest pockets of resilience across the western economy, even as nonprofits and agricultural producers face mounting headwinds.