April 12, 1972
According to bank directors, District businessmen believe that Phase II has not been very successful in bringing inflation under control and stated that the Pay Board's recent reorganization would not alter its effectiveness. Although employment growth was expected to improve, no significant reduction in unemployment was foreseen for the second quarter. Twin Cities retail sales in the first quarter were up modestly from a year ago and are expected to improve in the second quarter. In addition, District first quarter new car sales were quite strong and, due to improved farm income, District farm machinery sales strengthened in the first quarter.
Although they feel Phase II has helped, bank directors reported that District businessmen are not convinced that the Administration's efforts are bringing inflation under control. Given the large wage increases that have been permitted, one director reported that his area's businessmen consider further inflation inevitable. The only alternatives to Phase II mentioned by District businessmen were a wage-price freeze or some type of rigid controls. Because they felt both alternatives are unworkable, the general feeling was that now inflation would persist.
Bank directors indicated that the recent resignation of labor leaders from the Pay Board would not jeopardize that body's effectiveness. In fact, the consensus was that the labor leaders had thwarted the Pay Board's past efforts and that it would probably be more effective in the future.
Although employment growth was expected to improve, a survey of employment security offices in 16 of the District's largest labor areas revealed that generally no reduction in unemployment was anticipated. When asked to characterize the outlook for employment growth during the next 90 days, one respondent termed it as "excellent," nine considered it "good," and five called it "fair." Ten of the respondents looked for job openings in their areas to be up from a year ago, with eight terming the increase "slight," while two expected job openings to match last year's level. Four respondents anticipated job openings to be down from a year earlier. In spite of these encouraging responses, no reduction in unemployment was foreseen. Eight respondents indicated that second quarter unemployment would be up from a year ago with five respondents calling the increase "slight." Seven respondents disclosed that unemployment would probably match last year's second quarter level in their areas. However, a labor market analyst for the Minneapolis/St. Paul Metropolitan Area, which accounts for a third of the District's employment, looked for second quarter unemployment to be down slightly from a year ago.
A telephone survey of five major retailers located in the Twin Cities revealed that their sales were up from a year ago. One respondent, however, called his firm's first quarter sales growth soft and the increase experienced by three other firms could be termed moderate. The first quarter Minnesota sales of one large company's department and discount stores were up 4.2 per cent from a year ago, while a chain of discount stores reported a 5 per cent year-to-year sales increase in February and March. All respondents indicated that their sales gains in March were stronger than those recorded in January and February. In general, these respondents were optimistic about their expected second quarter sales.
According to a regional sales manager, new car sales were quite strong in the first quarter. The sales of automobiles produced by Ford and Chrysler were up markedly from a year ago. Chevrolet sales exceeded last year's level by 35.0 per cent in February and 9.1 per cent in March. Although other GM Divisions experienced first quarter year-to-year sales declines, these managers were quite pleased with this year's sales, as these decreases can be attributed to the recovery from the 1970 automobile strike which inflated their first quarter automobile sales last year. First quarter American Motors sales were only 1.4 per cent above a year ago.
District farm income strengthened in the first quarter which induced District farmers to spend much more heavily on farm equipment. An ad hoc survey of Ninth District area sales offices of farm equipment and farm supply firms revealed that equipment sales ranged from "no change" to "20 per cent greater" than sales in the first quarter of 1971. The latest published data on farm tractor sales show that the number of units sold in the District during January was 19 per cent larger than the number sold one year earlier. Practically all of the equipment manufacturers in our ad hoc survey reported that their first quarter sales could have been greater had not the increase in demand caught them without adequate inventories.