May 6, 1985
While overall employment and consumer spending have recently increased in the Ninth District, agricultural and resource-related weaknesses have continued. Some signs of slower manufacturing growth are also evident.
Employment
District labor market conditions have continued to improve,
regularly in the service sectors. Spurred by larger-than-usual
quarterly employment growth, the district's seasonally adjusted
unemployment rate fell a few tenths to 6.3 percent in the first
quarter. Indicative of this improvement, Minnesota's seasonally
adjusted unemployment rate fell to 5.6 percent in March, its lowest
since August 1981. Also in March, nonfarm employment reached a
record high in Minnesota. Employment growth has been particularly
evident in the Minneapolis-St. Paul metro area, which at the end of
last year ranked fifth fastest in employment growth among large
metro areas. Strong labor demand is present in Minneapolis, where
the help-wanted advertising index was recently 11 percent above its
year-earlier level. The seasonally adjusted unemployment rate also
appears to have fallen in Montana, dropping from 7.6 percent in
January to a probable 7 percent in March.
Recent labor developments have been mixed. Layoffs at a conglomerate with plants in the Twin Cities and Sioux Falls, South Dakota, continued. As a result, the latter area's unemployment rate rose measurably. The end of large construction projects decreased employment in parts of North Dakota. But a large copper mining operation in the hard-pressed Upper Peninsula of Michigan is very likely to reopen. By employing around 1,000 workers, it would provide a huge stimulus to this small area.
Consumer Spending
Large retailers or general merchandise in the Twin Cities report
that business has been good. Two large district chain operations had
better-than-expected performance in the first quarter, which appears
to have continued into April. Major retailers in bustling Sioux
Falls, South Dakota, report brisk business, attributed primarily to
price reductions and aggressive advertising. But Bank directors note
that business has slowed in southern Minnesota and has continued to
lag throughout the agriculturally dependent parts of this district.
A similar story is told for auto sales which have continued strong in diversified metro areas but have been generally weak in rural areas. Domestic manufacturers report that their sales, when compared to 1984, increased 9 percent through April. Slack demand in nonmetro areas has bogged down truck sales somewhat, though.
Housing activity is also still slack in rural areas, but sales of homes in the Twin Cities have improved. Sales in both Minneapolis and St. Paul have been well above 1984 levels--by more than 12 percent this February, for example. A Minnesota mortgage revenue bond program is expected to buoy sales further. Several Bank Directors note, however, that large inventories of unsold homes are still standing in other areas of the district.
Agriculture
As usual of late, there is little good news to report about
agriculture. The Minnesota farm price index's steady decline
continued through March. The spectre of overproduction looms over
dairy operations again, due to the end of the dairy diversion
program. Moisture is still lower than normal in northern Montana,
and both crop and ranch land values are still falling in that state.
There has been little participation in Minnesota's subsidized
interest program to facilitate spring planting. But the weather has
permitted earlier-than-normal plantings in Minnesota and South
Dakota.
Resource-Related Industries
District Bank directors report that recent developments in the
district's resource-related sectors haven't been favorable.
One large firm in Minnesota's paper industry is experiencing labor contract problems. Low foreign pulp prices are hurting district pulp producers. While waferboard plants are running at full speed, prices are depressed.
Due to soft prices and some business climate problems, oil and gas activities have slowed. In Montana, both the oil rig count and leased acreage renewals have dropped-the latter, dramatically. Oil drilling is off in North Dakota, too. Low prices there are also depressing the outlook for a big coal gasification operation.
Manufacturing
District manufacturing growth was particularly strong coming out of
the last national recession, but signs of slower growth have
emerged. Even the economically healthy Twin Cities metro area has
seen an increase in the number of unemployment insurance claims from
the durable goods manufacturing sector. High electricity costs have
helped threaten the operation of an aluminum plant in Montana.
Furthermore, farm implement production continues to lag, with a
North Dakota producer laying off between 40 and 50 employees.