August 6, 1984
The pace of economic growth in the Ninth District has moderated. Employment conditions remain healthy, in part due to heavy construction activity, and general merchandise and auto sales are still strong in the district's diversified cities. However, housing activity seems to have fallen off, and the region's agricultural sector is still suffering from declining land values and increasing debt service woes. As a result, both consumer spending and financial activities are slack in rural areas and in smaller cities and towns. The pace of tourism, an important contributor to the Ninth District's summer economy, appears to be varying around the region.
Employment
Employment conditions remain good in the district. In Minnesota, the
seasonally adjusted unemployment rate fell slightly to 6.0 percent
in May, then rose slightly to 6.2 percent in June. Analysts
attribute the increase to statistical quirks and to temporary
layoffs of nonstriking hospital workers, caused by a nurses' strike
which ended in July. In Duluth, Minnesota, fueled in part by heavy
public construction activity, employment rose to its highest level
in 18 months. Heavy construction activity is also lifting labor
demand in parts of Montana, in South Dakota, and in North Dakota. In
North Dakota, oil production is also increasing demand. June job
placements reached an all-time high at the Sioux Falls, South
Dakota, employment bureau.
Consumer Spending
Recent reports about general merchandise sales have been mixed;
sales remain strong in the diversified larger cities, but are spotty
in the smaller cities and towns that depend on agriculture. One
urban retailer says that its June and July sales were good. Its
downtown stores in the Minneapolis-St. Paul area did particularly
well, exceeding their sales goals. Retailers in Rochester,
Minnesota, are finding that business is being spurred by a high
level of visits to the city's famed medical complex. However, a Bank
director reports that sales in both Bismarck, North Dakota, and
western North Dakota haven't picked up. Directors of this Bank's
branch in Helena, Montana, see similar weakness in any areas of
Montana. While sales in diversified Sioux Falls, South Dakota, were
up sharply in the second quarter, South Dakota's rural retailers
suffered from declining sales.
District sales of motor vehicles—particularly full-size cars—continue to show strength across the district. A domestic manufacturer reports good sales in all models, with its full-size car sales 9 percent ahead of a year ago. Its inventories are about normal for this time of year.
Housing activity appears to have slowed somewhat. Twin Cities housing permits started to fall off in May. While Twin Cities home sales rose sharply in May, they fell off in June. Early reports indicate that sales in July won't be better than they were a year ago either. Slowing activity has also been noted lately in the Dakotas and in Montana, where a lot of home remodeling is being done in lieu of new home buying.
Agriculture
While crop conditions have improved throughout the district, farmers
are still suffering from low land prices and high debt service
burdens. The corn, soybean, sugar beet, and sunflower crop outlooks
have all benefited from drier weather. Because northeastern Montana
is still way too dry, though, both crop and livestock income is
being destroyed. The federal dairy diversion program and strong ice
cream sales are expected to help the district's dairy producers. But
this Bank's latest survey of agricultural bankers indicates that
local farmland values and farm debt service woes continued in the
second quarter.
Finance
Deposits at district commercial banks, savings and loans, and credit
unions rose at an annual rate of 7 percent between mid-June and mid-
July. Most of the growth occurred in Minnesota and Wisconsin.
District Bank directors report that financial activity has been
slack in rural parts of the district because of farmers'
difficulties. One notable event is the purchase of the largest
insurance agency in Montana by the district's largest bank holding
company.
Tourism
Tourism, which plays an important role in the Ninth District's
summer economy, is having a mixed season. While employment levels in
this industry and inquiries at state tourism offices are up in
Minnesota this year, bad weather and a fishing regulation dispute
with Canada have hurt the state's Arrowhead region (northeastern
Minnesota). The Heartland region of north central Minnesota is doing
better than last year, though. Wisconsin's Indianhead region is
having an excellent summer; there short, mid-week vacations are
becoming more popular. While tourist activity in the Upper Peninsula
of Michigan is good, it has not been as heavy as last year, due to
unstable weather. Bad weather and the Canadian exchange rate have
hurt business in South Dakota, particularly at Mount Rushmore, which
was fogged over during parts of June. A mixed picture is reported in
Montana, with more visitors than usual to Yellowstone National Park
and fewer to Glacier National Park.