June 25, 1984
With the exception or the agricultural sector, favorable economic trends continue in the Ninth District. Unemployment rates continue to fall, and both consumer spending and commercial investment continue to grow. Both deposits and loans are up. But the agricultural sector continues to be plagued by bad weather, low prices, and cash flow problems. As a result, smaller cities and towns dependent on agriculture are not faring as well as larger, more diversified cities.
Employment
District labor market conditions continue to improve, partly due to
seasonal factors. The Ninth District seasonally adjusted
unemployment rate fell very slightly to 6.5 percent in April. While
the unadjusted unemployment rate for Minnesota fell from 7.1 percent
in March to 6.5 percent in April, analysts attribute most of the
decline to seasonal factors. Initial unemployment claims in
Minnesota continued to seasonally decline, and average weekly
manufacturing earnings there rose. The Minneapolis help-wanted
advertising index rose a bit in April. In South Dakota, the
unadjusted unemployment rate also fell in April, to only 4.5
percent.
The district is facing some major labor market developments-both positive and negative. Another large bank is moving its credit card operation to Sioux Falls, South Dakota, creating hundreds of jobs, and a home appliance manufacturer is adding a few hundred workers to its plant there. But 6,000 hospital nurses are on strike in the Twin Cities, and a large iron pellet plant in northern Minnesota recently announced that it is planning a shutdown in August.
Consumer Spending
General merchandise sales grew only moderately in May, but sales
appear to be firming up in June. One large merchandiser reports that
its sales rose only 5 percent between this May and last. In the
Minneapolis-St. Paul area, another large merchandiser's May sales
were less than expected. Both merchandisers attribute part of the
problem to slack summer wear sales induced by cold, wet weather.
Both merchandisers also have experienced strong sales so far in
June, though. This Bank's director reports are similar. One director
says that home appliance sales, while strong, slowed in South Dakota
in May. Another director notes that while cold weather in May
flattened general retail sales in southern Minnesota, these sales
have been picking up so far in June.
Motor vehicle purchases are maintaining the strength apparent earlier this year. Regional managers of domestic auto companies report continuing good performance. One of them expects record second quarter sales and has less than two months inventories of both cars and trucks. Another reports this May's car sales up 22 percent over last May's. Recreational vehicles are selling exceptionally will. While generally good auto sales reports have come from the bigger cities in the Dakotas, the picture is mixed in Montana.
Housing activity appears to have firmed after some bad weather slowed it in March. Twin Cities housing permits and home sales rose sharply in April. A leading mortgage banking firm singled out the Minneapolis-St. Paul area as one of the few areas in the nation in which sales were still gaining. Activity has been strong in larger cities throughout the rest of the district, but slow in agriculturally dependent smaller cities and towns.
Commercial Construction
Commercial construction remains active in cities throughout the
district. Builders are expecting a record year in Billings and
Bozeman, Montana. A newspaper editor reports a lot of commercial
construction in the Fargo, North Dakota, area. A Chamber of Commerce
official in Aberdeen, South Dakota, notes that over $2 million in
building permits were issued there in May, primarily for commercial
projects.
Finance
Both deposits and loans have risen recently in the district.
Outstanding commercial and industrial loans at large Ninth District
banks rose 3.4 percent throughout May, to a level of $4.4 billion.
Total Deposits at those banks rose 5.9 percent throughout May.
Scattered evidence indicates that deposits are holding up even in
some agriculturally dependent regions. Acceptable agricultural loans
are becoming increasingly harder to find, though.
Agriculture
Despite some recent crop price increases, the agricultural economy
still being plagued by some low prices, bad weather, and cash flow
problems. Corn and soybean prices have risen, but milk and hog
prices are still low. A blizzard late in April caused substantial
livestock losses in Montana and South Dakota. One bank director
notes that northeastern Montana recently suffered from the worst
drought since the 1930s. Torrential rains gave that area some
relief, but at the same time destroyed some crops in parts of the
Dakotas and Minnesota. Many counties in the district have been
declared disaster areas because of this bad weather, thus making
farmers eligible for emergency loans. A Bank director recently
surveyed agricultural lenders in the Dakotas. Less than 20 percent
of the survey's respondents thought that farm cash flows would be
better in 1984 than in 1983, which itself was not a good year for
many farmers in the district. Accordingly, the majority of
respondents expected to deny more credit requests this year than
last. Another director notes that dairy operations continue to face
severe cash flow problems.