December 5, 1984
Except for some large layoffs in northeastern Minnesota, economic conditions in the Ninth District have not changed much lately. Generally favorable employment conditions have changed little from earlier this fall. Consumer spending appears to be stronger in the Minneapolis-St. Paul area than in other less diversified parts of the district. The pulp and paper and the oil and gas sectors are performing well, while the lumber and plywood and the iron mining sectors are not. Crop farmers' profitability has not improved much, but dairy and fat cattle prices have.
Employment
District employment conditions are generally stable. While
Minnesota's seasonally adjusted unemployment rate rose a bit in
September, the increase is widely thought to be due to statistical
quirks. In fact, in that state, seasonally adjusted nonfarm payroll
employment posted a September increase only slightly less than the
1984 average monthly increase, and average weekly earnings in
manufacturing industries increased slightly from August. Similar
reports come from other parts of the district. In the Dakotas, for
example, the September unemployment rate was only 4 percent. In the
Sioux Falls, South Dakota, area, it was as low as 3 percent.
Employment in one of the district's industries has not been stable recently: massive layoffs in the northeastern Minnesota iron mining sector were announced in November. Due to a slump in steel demand, about 4,500 more workers were laid off in an industry which had at one time directly employed 14,500 workers, but which more recently had employed only about 8,000. The latest layoffs are a severe blow to the northeastern Minnesota economy which had been recovering from lingering effects of the national recession.
Consumer Spending
A mixed pattern of consumer spending is reported. While growth is
generally noted in the Twin Cities, it is not in some other parts of
the district.
Sales of general merchandise have not been uniformly strong lately. At two large Twin City retailers, sales appear to have picked up late in November. Both of these retailers report November sales about 12 percent ahead of year-earlier levels, although inventories are still high. This Bank's directors also report good sales in parts of western Wisconsin and around Bozeman, Montana. Retail sales have not been so good in other parts of the District, however. In Rochester, Minnesota, early November sales were generally slow, with smaller retailers doing worse than larger retailers. One Bank director reports small increases at best for retailers in South Dakota, while other directors report a general merchandise slump in many parts of Montana and North Dakota.
Motor vehicle sales, in contrast, seem to be continuing at a good pace in many areas of the district (despite the effects of the General Motors strike). Regional offices of domestic auto manufacturers report that sales rose between September and October. Indicative of this strength, one manufacturer experienced 9 percent higher car sales and 43 percent higher truck sales this October than last. Its inventories are low but still adequate. Bank directors report that car sales in October and November were a little light in South Dakota and about the same as a year earlier in Bismarck, North Dakota.
While housing purchases have picked up lately in the Twin Cities and in some scattered areas, they have been slow in other areas. After falling in August, Twin City home sales rose in September, maintaining a level over 17 percent higher than a year earlier. October sales in Minneapolis maintained the September pace. Sales in Sioux Falls, South Dakota, were good, in part due to the availability of subsidized mortgages financed with mortgage revenue bonds. But Bank directors report that housing starts slowed in western Wisconsin and Montana, and many units remain unsold in Bismarck, North Dakota, and in Rochester, Minnesota.
Resource-Related Industries
The picture in resource-related industries is mixed, too. Two
sectors are continuing to do well. While expansion plans in the
paper industry been delayed, pulp and paper prices and production
are still strong, particularly for coated printing paper. Oil
production is also strong, with 50 rigs operating in the Williston
Basin of North Dakota and a new $51 million project to enhance oil
recovery from these wells. Due to the warm, dry weather, oil and gas
drilling has gone well in Montana, increasing employment there. Two
other sectors are not doing too well, though. As noted above,
continuing low steel demand helped cause massive layoffs recently in
northeastern Minnesota's iron mining industry. And domestic lumber
and plywood prices continue to be hurt by Canadian imports and
substitute building products.
Agriculture
Despite a generally favorable harvest, many district farmers are
still suffering from low product prices, excessive debt burdens, and
low land prices. Dairy farming and livestock operations have seen
some price improvement, though. The Minnesota farm price index fell
in October for the fourth consecutive month. It has fallen nearly 12
percent since June. Of the respondents to this Bank's late September
survey of district ag bankers, 44 percent said that farmers in their
areas earned less in the third quarter than a year earlier, and a
full 50 percent said that debt repayment was slower than normal for
that time of year. However, fat cattle prices have been quite strong
recently, and milk prices went up in October, as fluid milk supplies
tightened.