August 9, 1972
Although some improvement in economic activity was noted by bank directors, they do not expect any significant reductions in unemployment in their areas. Cool and rainy weather disrupted District tourist activity in June and July, but District tourist spending can still be said to be good this year. District crop development appears to be ahead of normal, despite late weather- delayed crop plantings. In addition, according to the results of our latest agricultural credit conditions survey, District farm earnings improved in the second quarter, while farmers' willingness to spend declined. Several bank directors, however, reported some increase in general capital spending in their areas.
The District's unemployment rate averaged 6 percent during the second quarter, as compared to 5.6 percent a year ago, and bank directors generally foresee no sizable reduction in their areas' rates of joblessness. A Wisconsin director revealed that his area's unemployment rate was above the state's rate and no significant reduction is expected. Favorable developments in construction, manufacturing, agricultural, and trade employment were reported by one South Dakota director, but accompanied by a sharp curtailment of jobs in the beef packing industry. The effects of recent administration pressures to curb meat price increases were partly responsible along with structural changes in the industry. A bank director associated with the District's construction industry anticipates no job expansion in that industrial sector. In Montana, a branch director foresees little improvement in that state's rate of unemployment because of cutbacks by the Anaconda Company and a cessation of work on the ABM site. However, the construction of a large power plant is expected to ease that state's unemployment problem. In addition, a director from Billings revealed improved employment conditions in that region. Unemployment in the upper peninsula of Michigan was reportedly improved due to the construction of a large mining facility.
According to both bank directors and resort and motel managers, District tourist spending so far this summer can be characterized as good, although not as good as expected. Despite cool and rainy weather in June and July, directors from the upper peninsula of Michigan, Minnesota, and South Dakota anticipate good tourist seasons. Tourist traffic was said to be ahead of a year earlier in Montana, but a branch director noted that both Glacier and Yellowstone National Parks were experiencing generally slower-than- expected concession activity as well as motel vacancies in both areas. A telephone survey of 22 resort and motel managers throughout the District confirmed these observations on tourist spending. When asked to describe business so far this summer, 5 managers replied "excellent," 2 responded "good," and 6 said "fair." According to 9 respondents, however, business has not been up to expectations. With regard to their outlook for the remainder of the tourist season—through August and September—6 respondents anticipated business to be "excellent," 13 termed their expectations "good," and 3 foresaw "fair" tourist business.
Pilots have been on strike against Northwest Airlines since late June, and this has hurt both tourist and business travel in the District. North Dakota and Montana have been left without adequate air service and, according to a newspaper article, North Dakota's travel industry has lost more than $1 million worth of business. The strike has also curbed air travel into and out of the Minneapolis- St. Paul metropolitan area.
The weather this spring delayed District crop plantings, but more favorable conditions in late June and early July advanced crop development ahead of normal. Most crops in Minnesota progressed faster than usual, and their outlook for this year was termed "excellent." In addition, a South Dakota director indicated that yields from his state's corn crop should also be "excellent," but those from the small grain crops he termed only good," for the wet weather reduced crop quality. The late plantings may still result in problems near the end of the growing season, however, and in some isolated areas, fields are still wet enough to retard crop growth.
According to the results of our latest agricultural credit conditions survey, Ninth District farm income continued to strengthen during the second quarter, but farmers' general willingness to spend declined. Spending on investment items slumped, as respondents reported that farmers were more cautious and inclined to use less intermediate-term credit. The demand for long-term loans also softened in the second quarter while short-term borrowing remained unchanged. This combination of increased farm earnings and decreased spending resulted in greater fund availability at District agricultural banks during the second quarter.
Several bank directors reported some pickup in general investment spending in their areas. In the upper peninsula of Michigan, small construction projects increased somewhat and residential building expanded because of a large mining construction project. Another director reported increased business confidence and a modest pickup in capital spending in his area. Businessmen's attitudes had improved in another director's region, and he expected increases in capital spending. Construction activity in Billings was reportedly very strong, but a Twin Cities area director reported no recent increase in requests for loans to finance capital expenditures.