March 9, 1977
The mood of the Twelfth District could be characterized by a drought-induced uncertainty in agriculture, aluminum, timber, skiing and energy, tempered by a general optimism that the housing boom will continue at least through midyear. Timber harvest has been excellent though there are fears of forest closure due to fire hazard. Hydro electric power to aluminum producers and irrigation water to farmers have both been cut back and are causing declines in production. Little or no snow has caused a substantial decline in ski resort activity. Low vacancy rates and a vigorous construction sector characterize most Western states.
To date, timber harvest has actually been aided by the dry winter, though there is concern that the extreme dryness will create such fire hazards that logging operations will be curtailed come summer. Northwest aluminum production has already been cut back 12 percent with 500 people laid off due to a cutback in power deliveries by the Bonneville Power Authority. By June, a further decline to 75 percent of normal production is anticipated. Despite recent snow, ski resorts in several western states remain in a depressed condition—$20 million in losses and 2,300 people laid off in Utah's skiing industry alone. Assuming precipitation continues at a quarter of normal, the Oregon Employment Division predicts that another 6,000 to 9,000 persons will lose their jobs.
The water situation is so uncertain in agriculture that farm equipment sales are at a standstill in Washington and in parts of Oregon and California. To date, loss estimates of Oregon's winter wheat range from 25 to 50 percent and gross farm income is expected to drop by 12 percent for the year by one banker's estimates. In Idaho, both sugar beet and winter wheat production are expected to be down significantly, though potatoes in the Snake River Basin should have ample water. Fruit growers in Washington's Yakima Valley are worried about the survival of their trees, since some expect irrigation deliveries to be only 6 percent of normal. There are reports of agricultural unemployment in several areas with serious irrigation cutbacks. In California's San Joaquin Valley, some observers expect acreage to be cut by 25 to 35 percent, with production costs up on the remaining land due to increased pumping costs. Oregon has resorted to cloud seeding and Idaho has raised legal questions about whether Oregon may be stealing rain that would have fallen on Idaho.
Weather has had a strong impact on western energy. Record declines in western stream flow has cut down the hydroelectric output of most western states. Last year at this time Oregon was sending California surplus hydroelectricity at a rate equivalent to 300,000 barrels of oil a day. This year, there is none to spare as the northwest has had to cut back its power deliveries to its own people: power supply to the energy-intensive aluminum industry was cut by 25 percent. Union, Standard and Gulf Oil have each purchased land in anticipation of the Alaskan pipeline's completion in June, possibly for refineries though construction has not yet commenced. Utah, in response to increased demand for coal, raised its coal output to a record 7.5 million tons last year.
Construction activity continues strong in all western states except Idaho where construction starts in January were 5 percent below a year earlier. In Utah, housing starts in January were running 53 percent above the previous January, though there was some concern that the Administration's proposals to stop a number of western water development projects would undermine this strength by the second half of the year. Dry weather in usually wet Oregon has allowed construction to boom. Very low vacancy rates (1.7 percent in Corvallis) characterize many Oregon cities.
The price of homes in Southern California continues to advance rapidly—by 39 percent in the past 12 months according to the records of one banker. The reason for this, explains the president of a construction company, is a rapid advance in land prices, assisted at least partially by environmental and other restrictions. Actual construction costs, he maintained, have remained fairly stable over the past one to two years. Kern County (the nation's leading agricultural producer) is experiencing a record housing boom due both to recent oil activity and the flight of businesses out of Los Angeles into the Bakersfield area.
Auto sales are reported good in Washington and Oregon, though big cars are moving faster than the smaller models. Retail sales are strong in Washington with Seattle's largest retailer reporting appliance and furniture sales running at 20 to 25 percent above a year ago. Consumer loan demand is quite strong in Southern California. Three sets of labor contracts expire before midyear (construction and dairy workers in Southern California and timber workers in Oregon) and there is some concern about the outcome of the associated negotiations. In aerospace, Boeing is reported to have strong sales and rising employment.