Fed Beige Book Reveals Hiring Freezes, AI Replacements and Weak Labor Demand Across U.S. Districts

‎Companies across the United States are using hiring freezes, attrition and emerging AI tools to manage headcounts as the labor market enters what the Federal Reserve describes as a “low-hire, low-fire” phase. The latest Beige Book indicates that organizations are actively avoiding mass layoffs by relying on quieter labor strategies.

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Fed’s Beige Book shows a low-hire, low-fire labor market as companies use hiring freezes, attrition and AI to manage headcounts without mass layoffs.

‎Sophie Park/Bloomberg via Getty Images

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‎Businesses are slowing growth by halting new recruitment and choosing not to replace departing employees. Some employers are using artificial intelligence to perform tasks that previously required additional staff, reducing the need to expand headcount.

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‎Consumers are sensing the shift. According to the Conference Board’s newest Consumer Confidence survey, 27.6% of respondents said jobs were plentiful, compared with 28.6% a month earlier. The share of people reporting that jobs were hard to get remained relatively unchanged.

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‎The Federal Reserve’s November Beige Book reports a slight decline in employment nationwide. Roughly half of the Federal districts recorded weaker labor demand, reflecting a trend of employers limiting hiring activity rather than resorting to layoffs.

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‎Several districts noted that many companies are adjusting employee hours to align with fluctuating business conditions instead of cutting staff. A few organizations stated that AI systems have replaced certain entry-level roles or boosted productivity enough to reduce the need for new hires.

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‎One case highlighted in the report involved a retailer in the St. Louis district that reduced staff hours after experiencing lower sales and ordering less inventory. The company implemented this shift to preserve its workforce.

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‎Many regions also observed a reduction in consumer spending. Restaurants reported that frequent diners are visiting less often, and returning customers are opting for lower-cost purchases.

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‎Workforce composition appears steady across multiple districts. Employers indicated that wage increases remain limited to standard cost-of-living adjustments, and most business leaders expect employment levels to remain stable. Hiring activity is anticipated to improve in 2026, according to insights from the Federal Reserve Bank of Kansas City.

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‎Forecasts suggest a more positive outlook on the horizon. Analysts expect employment conditions to strengthen as the Fed takes a more dovish stance next year under new leadership. Deutsche Bank projects that the labor market will stabilize in 2025 and begin to retighten, potentially lowering the unemployment rate to 4.4%.

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‎Hiring demand is expected to firm as economic growth improves, though analysts note the possibility that the current equilibrium between low hiring and low firing could shift.

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‎Recent data also points to underlying labor resilience. Oxford Economics reported that September’s stronger-than-expected jobs report—with 119,000 roles added and an unemployment rate of 4.4—reflects a labor market supported by spending from higher-income households. Analysts say this trend highlights the characteristics of a K-shaped economy.

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‎High-earner spending continues to support economic momentum, though recent stock market volatility introduces uncertainty. September’s report underscores the complexity of current labor conditions without providing definitive answers.