Companies face challenges with unpredictability and excessive expenditures
In the summer of 2025, the Federal Reserve Bank of Minneapolis conducted a General Business Survey to gauge the economic climate across its district. The survey received 731 responses from businesses spanning various industries, and the findings paint a picture of economic strain.
One of the key challenges that businesses have been facing is the increased costs of recent time-off policies. In Minnesota, some businesses have mentioned that these policies have presented challenges, particularly for small businesses that are struggling to keep up with the additional expenses.
Another concern for businesses is the impact of tariffs. Just over half of the respondents reported being negatively affected by recently proposed or implemented tariffs. This turbulence has caused consternation, especially for a manufacturer in North Dakota, who explained that it has affected their relationships with Canadian customers.
The economic strain has also led to a decline in profits for half of the surveyed businesses. This is further exacerbated by the rapid inflation in raw material markets, a problem highlighted by a Wisconsin manufacturing business owner. The increased costs have forced many businesses to keep prices relatively flat to avoid eating into their profits.
The current economic conditions have also made it difficult for businesses to keep up with wage increases. The owner of a Twin Cities services firm commented on the challenge, while the owner of a North Shore restaurant mentioned that they cannot afford to raise wages due to the paid leave requirements. Approximately one-third of businesses did not increase their wages in the last year.
Despite the challenges, many businesses have seen an increase in input costs compared to last year. This has made it difficult for some businesses to pass on the cost increases directly to their customers due to customer sensitivity to prices.
The survey also revealed that many businesses have struggled to find the right candidates for open positions. For businesses that were still hiring, they reported having more success getting applicants, but many of the applicants did not have the right skills or experience for the positions.
The challenges businesses have faced this year have made many respondents unsure of what the future may hold. Nearly half of the responding businesses had stopped hiring, and the share of firms looking for new full-time employees is also declining.
Despite the pessimistic outlook, some businesses are hesitant to see only the negative aspects. Many businesses indicated they often struggled to see silver linings ahead. However, only 27% of businesses expect revenue to grow in the next three months, and 43% of businesses had a pessimistic view of the next six months, while only one-third were optimistic.
The survey results do not contain any information about specific companies reporting a decline in earnings over the last 12 months. However, the findings suggest that businesses in the Federal Reserve's Ninth District are facing significant economic challenges, and the future remains uncertain.
