May 4, 1987
The Ninth District's economy has improved slightly. Employment conditions have improved a bit. Consumer spending has been stable, with home spending continuing strong in metropolitan areas and tourist spending expected to pick up in rural areas. Some signs of improvement have also been noted by observers in agricultural areas. Resource-related industries, however, turned in a mixed performance.
Employment
Employment conditions improved slightly during the first quarter. In
Minnesota, total employment in March rose to a level 3.1 percent
higher than a year earlier, bringing the state's March unemployment
rate down to 5.1 percent. Another indicator of strength was
Minnesota's falling level of initial unemployment claims, which fell
in February to 9 percent below its year-earlier level. In South
Dakota, employment grew and unemployment rates declined as well.
Around both Sioux Falls and Rapid City, unemployment rates are lower
than 5 percent. North Dakota and Montana, both dependent on
resource-related industries, fared less well: they continued to
experience higher unemployment rates than in the rest of the
district.
Consumer Spending
For the most part, spending on general merchandise held steady. One
retailer reports that, so far, April sales have been good: its
inventories are in line with sales and its retail credit quality is
stable. One Bank director notes that while many Montana retailers
are still stocking inventory on a break-even basis, some retail
growth has occurred in the Great Falls area. And scattered reports
indicate stable retail sales in Dickinson, North Dakota and
Billings, Montana.
Sales rates for motor vehicles continued to moderate from the rapid pace set last year. Reports from zone offices of domestic manufacturers show that district car and truck sales were only 0.1 percent higher early in April than they were a year earlier. One domestic manufacturer notes that its inventories are now too high; still, its district car sales were 7 percent higher this March than last. Domestic manufacturers also expect the falling yen-dollar ratio to aid sales further, as American buyers purchase domestic vehicles instead of Japanese ones. Other sources indicate that auto sales have slowed in agricultural areas of Montana and North Dakota.
Warm weather and reasonable financing continued to aid housing activity in the district. In the Minneapolis-St. Paul metro area, homes again sold briskly. For example, Minneapolis home sales in February exceeded year-earlier sales by nearly 35 percent and, in March, by 40 percent. In the metro area, single-family housing permits (an indicator of future sales) posted a 50 percent gain in February, compared to a year earlier. But multifamily housing construction declined in the metro area. Homebuilding is still slow in the oil patches of western North Dakota and Montana.
Harbingers of increased tourist spending are evident to observers of the tourist industry. The increasing popularity of historic forts is expected to help western North Dakota, hard hit by the oil and gas slump. In South Dakota, inquiries about summer travel are running 13 percent higher than last year. In Montana, inquiries are up 25 percent so far, and they are also up in Michigan's Upper Peninsula.
Agriculture
Some guarded optimism is being expressed in some of the district's
agricultural areas. One Bank director reports that conditions in
eastern North Dakota have improved. Land values there have firmed
and production costs are lower. Another Bank director notes that
soil moisture in Montana is mostly adequate, despite light snow
coverage this winter. In March, beef cattle prices reached their
highest levels in Minnesota since September 1980. Mostly mild winter
conditions also helped cattle ranchers in Montana. While hog prices
have dropped some recently, they are still above their levels a year
ago. In fact, a new hog-raising operation is just starting up near
Pierre, South Dakota.
This Bank's first-quarter survey of rural bankers also indicates some improvement in farm conditions. Many of the surveyed bankers believe that net farm income in their areas was higher in the first quarter than a year ago, citing lower production costs and higher government payments for the improvement. Especially helpful to farmers were advance deficiency payments and increased participation in the Conservation Reserve Program. The surveyed bankers also indicate that the rate of farm foreclosures has lessened somewhat.
Resource-Related Industries
The performance of the district's major resource-related industries
was mixed. Producer prices for pulp and newsprint rose, while prices
for lightweight coated and supercalendered paper fell. A mill in
northern Minnesota is filling a need created by earthquake damage to
a newsprint mill in New Zealand. The lower dollar has also helped
quell imports of foreign newsprint. In contrast, drilling in the
district's oil-producing areas has been almost nonexistent, with
only six new rigs operating in North Dakota's Williston Basin. This
has prompted that state to lower taxes on extracting oil from new
wells.