December 6, 1983
The Ninth District economy has settled in for the winter with more of the moderate growth reported last month. Unemployment generally continues to fall, while consumer spending continues to strengthen. Mining and manufacturing activity may be gaining some momentum, as maybe tourist business at heavily snow-covered ski resorts. Agricultural conditions haven't changed much from last month's report.
Employment
The most recent data indicate that employment prospects have
continued to improve in much of the district. Total employment in
Minnesota rose by over 12,000 workers between August and September.
As a result, the state's unemployment rate dropped from 7.2 percent
to 6.5 percent. In the Minneapolis-St. Paul metropolitan area, the
jobless rate dropped slightly more, from 6.4 percent to 5.6 percent,
and in South Dakota it also dropped a bit, from 4.4 percent to 4.2
percent. In Wisconsin, the unemployment rate was 9.2 percent in
October, up only slightly from 9.0 percent in September. In Montana,
it dropped to 6.6 percent in September, down from 7.8 percent in
August. Regional analysts in Duluth, Minnesota—which was hit hard
by the recession—expect its unemployment rate to fall below 12
percent in September from its seasonally adjusted rate of 12.1
percent in August. But unemployment remains very high in other parts
of northern Minnesota and Michigan, reflecting the depressed mining
industry.
Consumer Spending
Buoyed by brisk holiday sales, overall consumer spending is ending
the year on an uptick.
Early reports indicate that sales of general merchandise in the holiday shopping season will be at least 20 percent higher than a year ago. One Twin Cities retail chain reports that this November is its best ever, with double-digit sales increases in its suburban locations. Electronic components and intimate apparel are moving particularly well there. Sales in Duluth, Minnesota, are surprisingly good, given the continuing weakness in this local economy. One chain in Rochester, Minnesota, recently broke its record for single-day sales, and stores have opened early to accommodate the Christmas rush. Our Bank directors report that sales are good throughout most of North and South Dakota, where snows have increased snowblower sales. General merchandise sales in Montana are spotty—stronger in the western part of the state than in the eastern part.
Auto sales are also maintaining the strength evident last month. District Bank directors report that both new and used car sales are good. Order backlogs for 1984 models have appeared in western Wisconsin. In South Dakota, large cars are selling better than small ones.
Home sales have not deteriorated much from last month's pace. Unit sales in the Twin Cities in November were 14 percent below those in October, but total unit sales in that area are 35 percent higher in 1983 than in 1982. District directors report a housing boom in both Fargo and Bismarck, North Dakota, but a softening market in Eau Claire, Wisconsin. The more expensive homes are selling best in Billings, Montana.
Mining and Manufacturing
Several encouraging signs appeared in mining and manufacturing this
month, indicating that these industries may be gaining momentum.
Paper production is doing "super," according to one director.
According to another, demand for waferboard is sufficient to justify
a few more plants in hard-pressed regions of northern Minnesota and
Michigan. Also, an iron mining operation in each of these regions is
reopening. A cheese plant in Wisconsin is celebrating its best
business in a long time, and a brewery is also toasting a good year.
All this follows healthy third quarter earnings increases at several
of the largest manufacturers in the district.
There is, however, still room for improvement in district mining and manufacturing. The industrial space vacancy rate recently increased in the Twin Cities. And, although oil and gas activity is up substantially in North Dakota, coal production is down a bit in Montana.
Tourism
District tourism was good this fall, and most of the industry looks
forward to a good winter. Resorts in the Indianhead region of
northern Wisconsin and the Upper Peninsula of Michigan were filled
with deer hunters this fall. With the inevitable arrival of the
ubiquitous district snow, ski resorts are preparing for an onslaught
of business. The Big Sky ski resort near Bozeman, Montana, has added
two new gondolas and forty new condominiums. But a 5 percent user
fee for snowmobile trail grooming has some Michigan officials
worried.
Agriculture
High corn and soybean prices and the federal Payment-In-Kind (PIK)
program are still helping boost farm income. Despite Minnesota's
smallest corn crop since 1976, high prices and the estimated $600
million worth of PIK corn paid to Minnesota farmers will bring that
state's total corn receipts up to $1.8 billion. This exceeds
receipts in the bumper crop years of 1981 and 1982. Minnesota's
soybean crop this year is its fourth largest, and soybean prices are
currently at about $8 a bushel. This makes the Minnesota soybean
crop worth about the same as the state's corn crop this year. A
similar soybean story is reported in both North and South Dakota.
The stories for wheat and other district crops don't detract from this. Wheat yields are generally good in North Dakota and Montana. While the sunflower crop in North Dakota is down about 40 percent, higher sunflower prices will probably keep receipts from falling much.
However, the district's livestock operations are still being hurt by high feed costs and low cattle prices. Those prices are down as much as 17 percent from a year ago. The continued cost-price squeeze has caused a culling of herds which will further depress prices, an effect which could be exacerbated by the new dairy diversion program. Prices are expected to pick up later next year when the reduced herds are brought to market, though.