March 12, 1985
With the exception of agriculture and some resource-related activities, the Ninth District economy has shown signs of strength so far this year. Nonfarm employment indicators have generally remained good, consumer spending in diversified cities has picked up a bit, and loans and deposits at large city banks have both grown.
Employment
Nonfarm employment conditions in much of the Ninth District have
remained good. The seasonally adjusted unemployment rate for the
district fell a bit to 6.4 percent in December. In January, the
Minnesota unemployment rate also edged down to 6.4 percent,
reversing a slight rising trend, with the biggest employment gain
coming in the trade and service sectors. Employment in the
Minneapolis-St. Paul metro area was over 50,000 people higher than a
year ago, and a new race track is expected to employ another 500
people there. But unemployment remained over 20 percent in the
mining-dependent region of northeastern Minnesota and the Upper
Peninsula of Michigan, and layoffs boosted unemployment in South
Dakota.
Consumer Spending
Consumer spending on general merchandise has continued its familiar
patterns: good-to-strong in diversified cities and poor in
agriculture- or resource-dependent smaller towns. One chain of
department stores in the Twin Cities had good traffic in February,
although sales and discounts held down its profit margin. January
net sales tax receipts in Minnesota were up 6 percent from a year
earlier. This Bank's directors report that major malls were busy in
the larger cities of South Dakota and in Duluth and Rochester,
Minnesota.
After a slow start in January, motor vehicle sales picked up considerably in February. The regional office of one large domestic manufacturer reports that sales in late February were high enough to bring current year-to-date sales up to levels of a year ago. Another manufacturer says its trucks sold particularly well recently, leaving its inventory levels in the low-to- normal range. Dealers in Sioux Falls, South Dakota, and Fargo, North Dakota, also report good auto sales.
The pace of home buying has been generally at or above that of a year ago. Through February, Twin Cities home sales were up 14 percent over a year earlier. Both listings and housing permits were up there, too. According to scattered reports, housing activity was fairly good in Rochester, Minnesota, and Fargo, North Dakota. But home sales in Sioux Falls, South Dakota, were lower this January than last.
Tourist expenditures at ski resorts in northwestern Wisconsin and the Upper Peninsula of Michigan were harmed somewhat by warm weather late in February. They are expected to pick up soon, though. A lot of snow usually falls early in March. And a new hotel was just finished in Escanaba, Michigan.
Agriculture
Little improvement has been seen in the troubled agriculture sector.
The Minnesota farm price index declined another 2 percent in
February. Crop prices that month were 15 percent below their levels
a year earlier. Dairy farmers worried about the ramifications of the
March 31 end of the federal diversion program. Cattle prices weren't
high enough to bring much profit to livestock operations in Montana.
But the Minnesota legislature recently passed a bill providing $25
million to subsidize interest payments on additional loans to
heavily indebted farmers. And the Standard Oil Company of Indiana's
plan to substitute ethanol for lead in regular gas should somewhat
increase the demand and price for corn.
Resource-Related Industries
Performance among resource-related industries has been mixed this
year. After a big year for oil drilling and production in North
Dakota's Williston Basin, drilling slumped during February, partly
because of poor weather. While the district's timber industry has
continued to be hurt by overproduction, federal pricing, and
Canadian imports, the damage has been less in Montana than in other
parts of the Northwest. Demand for district pulp and paper has
remained strong, but foreign import substitution has increased.
Waferboard production capacity has increased, too. Iron mining
operations have continued to call back some of the many workers laid
off last November.
Finance
Deposits at Ninth District banks didn't change much between mid-
January and mid-February; decreases at country banks offset
increases at the four largest banks. Commercial and industrial loans
at the large banks also grew early this year. In January, their
outstanding loan volume was 15.8 percent above volume a year ago.