January 30, 1985
The Ninth District economy has grown at a modest rate in the last few months. Employment conditions have remained stable, with hire-backs in mining offsetting new layoffs in manufacturing. Consumer spending, while not as strong as some merchants hoped, has generally surpassed the previous year's excellent performance. Encouraging signs have appeared in commercial and industrial construction. Financial activity has been normal for this time of year. But little improvement has occurred in the hard-pressed agriculture sector.
Employment
Overall, employment conditions have remained fairly stable. The
Minneapolis help-wanted advertising index barely changed between
October and November. Unemployment remained low in major
metropolitan areas of the district, including Minneapolis-St. Paul
and Rochester, Minnesota, and Rapid City and Sioux Falls, South
Dakota. In northern Minnesota, employment in mining-related
activities did fall off sharply in November. But over one-third of
the laid-off workers were called back in January, and more are
expected to be called back in the coming months. Also, a new white
paper mill will employ between 300 and 500 workers in the troubled
Upper Peninsula of Michigan. Recently, however, two sizeable
manufacturing firms laid off 500 workers apiece, one in St. Paul,
Minnesota, and the other in Sioux Falls, South Dakota.
Consumer Spending
District retail sales of general merchandise during the holiday
season bettered 1983's excellent holiday sales, but not by as much
as some merchants had expected. For example, one Twin Cities
department store group expected better sales growth. A larger chain
of stores in the same area, however, met its growth objectives and
is continuing to do so in January. Inventories aren't excessively
high at either chain. Similar reports come from other large cities
of the district, including Sioux Falls, South Dakota, and Bismarck,
North Dakota.
While regional auto sales dropped this December from the unusually strong levels of a year earlier, they picked up some in January. For example, one large domestic manufacturer reports that its district car and truck sales fell more than 20 percent this December, but still were better than in most years. Several of' this Bank's directors note similar soft November and December vehicle sales in their areas of the district. Auto inventories have reportedly increased recently from generally low 1984 levels. But regional sales managers for domestic manufacturers report a big sales pickup early in January.
Housing activity also appears to have slowed and rebounded in the last few months. Twin Cities home sales fell off a bit in November from the pace of a year earlier. Primarily due to a reduction in multifamily buildings, the number of Twin Cities housing permits this November also did not reach its year-earlier level. The value of Twin Cities residential construction contract awards did increase strongly in November, though. Future permit figures should reflect this increase.
Adequate snowfall has helped district ski resorts attract tourist dollars this winter. Ski areas in Montana and the Upper Peninsula of Michigan report good skiing conditions.
Commercial and Industrial Construction
Commercial and industrial construction activity in the district has
been robust lately. Minnesota commercial and industrial contract
awards were about 50 percent higher this November than last. Three
of the district's largest contractors report a recent pickup in
activity, which they expect to continue. None of these contractors
has had problems getting supplies. The most recent available data
indicate that industrial vacancy rates have declined a bit in the
Twin Cities. One Bank director notes that construction projects
(including a new hotel) are really taking off in Rapid City, South
Dakota; this area is benefiting from the needs of the military.
Finance
Deposits at Ninth District banks, thrifts, and credit unions each
rose in December—altogether, at an annual growth rate of 15
percent. At the same time, at large district banks, commercial and
industrial loans grew slightly slower and personal loans financing
holiday expenditures grew much faster.
Agriculture
The district's gloomy agriculture picture has not brightened much
lately, however. The Minnesota farm price index fell 2 percent in
December, its fifth monthly decline in the last six months. This
Bank's late December survey of rural bankers indicates that low farm
income aggravated farmers' debt repayment troubles in the fourth
quarter and that little or no improvement is expected early this
year. This Bank's directors largely agree with that assessment,
noting as well a continuing slide in farm land values. Falling land
values are mainly responsible for an estimated $8.9 billion loss of
Minnesota farmers' equity over the past three years. Cheap grain has
helped improve the profitability of livestock operations, though.