The SF Fed maintains three advisory councils: the Economic Advisory Council, Community Advisory Council, and Community Depository Institutions Advisory Council. The members of these councils represent businesses, financial institutions, and community organizations across the Twelfth District. The councils regularly convene to discuss the District’s economy, bringing valuable perspectives from around the District to the SF Fed.
We have created Advisory Council Observations to share what we have learned. This series summarizes the recent insights about Twelfth District economic conditions contributed by our councils.
Our advisory councils are a crucial source of on-the-ground insights about the Twelfth District’s economy, and each has a specific focus:
• The Economic Advisory Council (EAC) provides observations about the District’s economic and business conditions.
• The Community Advisory Council (CAC) serves as an important source of information on economic conditions in lower-income communities in the District.
• The Community Depository Institutions Advisory Council (CDIAC) shares information about banking conditions and the ability of community depository institutions to support local markets.
President Mary Daly, other leaders from the Bank’s Executive Leadership Team and the Economic Research, Public Engagement, and Banking Supervision groups, attend twice-yearly council meetings and facilitate robust discussions. They ask council members to provide their assessments of the general health of the economy, while also surfacing specific short- and longer-term opportunities and concerns.
Economic Advisory Council
Members of the Economic Advisory Council shared a retrospective overview of 2024 and their expectations for 2025. Council members reported robust economic activity in most sectors throughout 2024 but highlighted some sluggishness in the real estate and construction sectors. They said that strength of consumer demand surprised to the upside in 2024, but there were reports of some pullback in discretionary spending and an emphasis on discounts and promotions. Council members also noted that labor was more available, and worker retention improved across industries. Reports on applicant quality were mixed. Members reported that wage pressures moderated, and end-of-year pay adjustments and merit-based bonuses were generally in line with historical averages. They also shared that price pressures eased modestly throughout the year, but at a slower pace relative to 2023.
Looking ahead, council members generally expected economic activity to remain solid in 2025, though several members highlighted the elevated degree of uncertainty and expectations for upward pressure on inflation.
Council members noted a few other current developments, including continued investment in generative artificial intelligence (GenAI) technologies and their impact on activity and productivity. One council member mentioned that the recent proliferation of GenAI models abroad was expected to boost domestic competition and funding for startups. Some reports highlighted risks to the outlook and local spending stemming from overall uncertainty.
Community Advisory Council
Housing concerns are top of mind for many council members. In Idaho, for example, council members reported outsized housing price increases, due in part to migration from other Western states and newcomers buying homes with all cash offers. Members noted young people graduating from college are unable to stay in Idaho, which further reduces the state’s ability to achieve homegrown employment. A council member shared that Hawai’i is also experiencing outmigration, with reported high costs of living leading to out-of-state moves and residential overcrowding.
Council members reported that, throughout the District, evictions continue to rise, and food bank usage continues to increase—reaching levels seen in pandemic times, but without the additional government and philanthropic support. In Los Angeles County, a council member noted that demand for providing housing assistance and combatting food insecurity has been made worse by the recent wildfires.
Members report that housing developers are seeking to cut red tape and expedite permits to increase supply. At the same time, they shared that communities are calling for changes regarding short-term rentals so they do not take away housing stock from long-term renters. A mismatch of job locations and housing availability was articulated. One member noted that accessory dwelling units (ADUs) are a potential means of increasing density, by housing more people on a single property. Members also shared that more affordable homes are being purchased by higher income households, remodeled, and then reentering the housing market at much higher prices.
The Council also shared that childcare costs are exerting pressure on local communities in the District, with young families putting off purchasing a home in order to pay for child care. For some families, they said that responding to the cost has meant that one parent is staying home rather than staying in the labor market. In order to attract and develop talent, members cite a greater need for employee policies that allow for additional support for young families.
Members advised that people are holding off on starting small businesses, and existing businesses are not seeing the level of sales they had been seeing before the start of the year. They note that consumers are decreasing how and where they are spending and what they are buying. Members are sensing that the motivation for saving has shifted toward preparing for uncertainty versus gearing up for future investments or purchases.
Underneath the aggregate, members are seeing that the equation their communities have been working with since the pandemic is changing—especially for low to moderate income (LMI) communities. They highlight that public benefits and personal savings are reduced, and the labor market is unable to make up that difference.
Members note that nonprofits are under pressure, as they face a high level of uncertainty, leading to budget freezes, staff layoffs, reduced hours or a more volunteer-focused model. They are seeing an urgency to shift to a more balanced portfolio of funding sources that includes more private and philanthropic funding. However, members note that even with increases in these additional sources of funding, gaps will likely remain.
Community Depository Institutions Advisory Council
Council members indicated that they are approaching the year with cautious optimism and see areas for growth, despite potential challenges. Multiple members reported higher growth in their loan portfolios.
Council members referenced growth strategies, such as expanding customer segments and exploring potential partnerships with fintech companies. Council members also discussed various challenges, such as local population declines, growing competition from credit unions and online lenders, and the increasing cost of data management.
Members discussed the importance of considering both the benefits and the costs of regulations, individually and cumulatively, for community banks. Further discussion focused on opportunities to better match the aims of community banking with regulatory practices, and how community banks approach meeting regulatory requirements with the smaller scale of resources and staff they have compared to larger banks.
Council members reported that they are beginning to see the impacts of their investments in AI, and that they are looking at ways to better leverage these capabilities this year. They highlighted several value propositions for AI usage among community depository institutions, including internal risk monitoring, customer communications, and marketing decisions.
Leveraging Real-Time Insights
Advisory councils are a vital source of information for the SF Fed. They provide valuable insights into how businesses and households across the Twelfth District are navigating economic conditions on a daily basis. These insights help inform and support the SF Fed’s mission to advance the nation’s monetary, financial, and payment systems to build a stronger economy for all Americans.
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.