U.S. economy gets off to a choppy start in 2026, the Fed finds. Here's the good and bad news.

By Jeffry Bartash

More companies are using AI, Fed's 'beige book' finds - but not to replace workers

The U.S. economy has sent mixed signals early in the new year, the Federal Reserve said.

The U.S. economy grew at a mild pace early in the new year, according to the Federal Reserve, with "uncertainty," higher prices and severe winter weather holding back growth.

The Fed offers its own evaluation of the economy eight times a year through what is known as the "beige book" report.

Here's a rundown of what the Fed found on the economy, jobs and inflation. The latest evaluation covered the period of Jan. 5 to Feb. 23.

Economy

The economy experienced little improvement in growth in the first two months of the year, the beige book found.

Affordability remained front and center in the minds of consumers. Rising inflation, for instance, led to less spending by lower-income households, the Fed said.

Winter storms, meanwhile, discouraged shoppers from going to retail stores, while economic uncertainty largely tied to tariffs also weighed on growth.

The good news? Businesses expected better times ahead.

"Overall, economic expectations were optimistic, with most districts expecting slight to moderate growth in the coming months," the report said.

Jobs market

Most businesses remained in a low-hire mode: Seven of the 12 Fed districts that cover the entire country reported no change in employment.

Companies were trying to see if artificial intelligence could improve how they do business, but most said the goal was "productivity enhancement rather than worker replacement."

Worker pay was fairly steady. Companies said healthcare costs had increased.

Inflation

Many businesses raised prices "moderately" in January and February as their own costs increased due to tariffs, the Fed said.

Yet customers also resisted prices increases, forcing some firms to keep prices the same.

"On balance, firms expected prices to rise at a somewhat slower pace in the near term," the Fed said.

-Jeffry Bartash

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03-04-26 1459ET