June 14, 1972
Despite the fact the unemployment rate in the Minneapolis/St. Paul metropolitan area remained unchanged this spring, the district's overall rate of joblessness rose as unemployment increased in other areas. District businessmen doubt Phase II can achieve its goals, but do believe the Administration's efforts are helping curb inflation. A recent newspaper poll disclosed Minnesota residents were far from unanimous in their economic outlook.
The results of our second-quarter Industrial Expectations Survey suggest continued improvement in district manufacturing activity. Also, district resort and motel managers are looking forward to a good tourist season this summer. District crop development has been retarded, however. Weather-caused delays are forcing farmers in some areas to plant less profitable crops on remaining unseeded acreages.
After averaging 5.3 percent in January and February, the district's unemployment rate, seasonally adjusted, jumped to 5.7 percent in March and rose to 5.9 percent in April. Much of the recent rise in unemployment can be traced to northeastern Minnesota. In addition to U.S. Steel closing a plant in Duluth, a banker there reported the delayed opening this year of the Great Lakes shipping season had also retarded employment expansion in his area. Furthermore, Minnesota this spring experienced its smallest seasonal rise in construction employment in ten years. Unemployment is also a problem in Montana, and a branch director reported the Anaconda Company this year is laying off approximately 1,500 people in that state. In addition, cessation of construction on the ABM site at Malmstrom Air Force Base has already cost the Great Falls area 1,000 construction jobs.
On the other hand, the unemployment rate in the Minneapolis/St. Paul metropolitan area has not risen this spring and a Minnesota Department of Manpower Services spokesman reported jobs were more plentiful this spring than twelve months earlier. Directors from North Dakota, South Dakota, the Upper Peninsula of Michigan and northwestern Wisconsin reported some improvement in labor market conditions this spring.
Although district businessmen are skeptical of whether or not Phase II will be able to achieve its goals, bank directors indicated their contacts believe the Administration's efforts have slowed the rate of inflation. In addition, one director reported district businessmen currently were more optimistic about expected price performance than they were at the beginning of the year. Another director stated his area's recent pickup in business activity had lessened concern over wage-price controls. No directors foresaw any shift this year in the Administration's program to combat inflation. One director, however, reported the Pay Board was getting tougher in its rulings.
A recent Minnesota poll revealed district residents have mixed expectations about economic activity during the next six months. In assessing the overall economy, 50 percent of the respondents looked for "good times" while 44 percent anticipated "bad times." When asked to comment on labor market developments, 35 percent expected employment to increase, 41 percent foresaw no change and 23 percent anticipated the number of people holding jobs would decrease. Survey respondents were more optimistic about curbing inflation than they were a year ago. In this current survey 50 percent indicated they expected the prices of most things they buy to increase as compared to 73 percent who gave this reply a year ago.
Responses to our second-quarter Industrial Expectations Survey suggest continued expansion in district manufacturing activity. The strongest year-to-year sales increase in ten quarters was achieved in the first quarter, when district manufacturing sales advanced 12.2 percent. This gain surpassed the 6.5 percent sales advance expected last February and resulted from an unexpected strengthening in both durable and nondurable goods sales. Despite their heartening first-quarter performance, however, district manufacturers only modestly revised upward their expectations for the second and third quarters.
District motel and resort managers, according to a telephone survey, are optimistic about this summer's tourist business. When asked to characterize their outlook for this summer, eleven respondents expected their business to be "excellent," three termed their anticipations "very good" and eight foresaw a "good" tourist season. In the western portion of the district, Yellowstone National Park's centennial is expected to attract additional tourists.
Crop development has been retarded throughout the district. Generally, spring weather was late, but the greatest delays were caused by recent excessive rainfall in feedgrains-producing areas of southern Minnesota and eastern South Dakota. Estimates of the degree of lateness are greater in the western portions of this region. A director from east-central South Dakota places the overall stage of crop development at three weeks behind normal and reports much of the acreage prepared for corn (principal crop of the region) is being switched to less profitable grain sorghums. Other reports indicate switching to soybean production in southern Minnesota.