June 15, 1988
Economic trends in the Ninth District continued to be favorable this spring. Unemployment declined again, and consumer spending held up surprisingly well. Some important new construction projects were announced. The forest products and mining sectors benefited from increased demand. Except for excessive dryness, agricultural conditions remained stable.
Labor Markets
Labor market conditions remained favorable in the last few months.
Minnesota's unemployment rate dipped to 3.8 percent in April, its
lowest rate in more than eight years. The state's initial
unemployment claims were about 3 percentage points lower this April
than in April 1987. In Montana and North Dakota, unemployment rates
were also estimated to have fallen significantly in April. For South
Dakota, March data show that job growth continued, with
manufacturing leading all other industries.
Consumer Spending
Retail spending on general merchandise has borne up well recently.
One retail chain reports that its department stores' sales in the
district were 9 percent higher this May than last. Another chain
reports that Memorial Day sales were brisk and that its sales were
up 14 percent so far this year. This chain is continuing to remodel
some stores while building additions to others. Contrary to
experience over the last few years, sales growth has not been
confined to just major metropolitan areas. A Bank director notes
that retail sales were holding up well in most North Dakota cities,
with spending by Canadian visitors helping retailers in Minot and
Grand Forks. Inventories are at acceptable levels, and no
significant credit problems have been reported.
Motor vehicles continued to sell well throughout the district this spring. The car and truck sales of one domestic manufacturer were around 10 percent higher during the first three weeks in May than they were a year ago. Another domestic manufacturer reports that its truck sales were up by even more than 10 percent during May. Smaller dealers in outstate areas have done particularly well this year, but sales at larger dealers in metro areas also surged in May. The rapid sales growth has left inventories a bit tight.
While housing activity this spring fell from its record-setting pace of a year earlier, sales haven't been bad. In April, the total value of homes sold in the Minneapolis-St. Paul metro area was only 6 percent lower than in April 1987. A representative of Minnesota realtors observes that the market to be "healthy across the board." Supporting this claim elsewhere, a reporter in Sioux Falls, South Dakota, observes that the city's housing market was "stable, but not booming."
Nonresidential Construction
Several significant construction projects have been announced
recently. A large computer company released plans to add 76 stories
of office space to downtown Minneapolis. A financial forms maker
chose a St. Paul suburb (over five other sites outside the district)
as the location for a large office and factory complex, which could
employ another 1,500 workers. Contracts for the construction of
public infrastructure in Minnesota were up substantially this March,
while contracts awarded for other types of construction were down.
Resource-Related Industries
More favorable news was generated by the district's important forest
products and mining sectors. A paper industry consultant notes that
the paper business has been booming, with all Minnesota mills
running "flat out." Prices for printing paper are particularly firm.
More paper machines may be installed later this year. Plants
producing waferboard, a paper-based building material, are also
running at full tilt, although prices are weak. After five years of
hard times, the district's iron ore industry is recovering a bit.
During April, iron ore shipments from Duluth and Superior to steel
mills across the Great Lakes were 27 percent higher than a year
earlier. An iron ore facility in northeastern Minnesota will recall
around 80 laid-off workers to reopen a production line last used six
years ago. Iron ore output is also up in Michigan's Upper Peninsula,
where hiring has sometimes exceeded the number of workers laid off.
And in Minnesota a plan has been spawned to convert abandoned iron
mine pits into farms for salmon and trout production.
Agriculture
Excessive dryness has become a major concern for district farmers,
although most other developments have been favorable. Topsoil
moisture is short in Minnesota, northern South Dakota, and eastern
North Dakota. But a Bank director from Montana reports that some
rains in May helped a lot in that state. More favorably, prices of
important district crops and livestock have risen. The Minnesota
farm price index rose in April. The price received for wheat rose 10
cents over the previous month. A Bank director from North Dakota
notes that soybean prices have been particularly strong, and another
from Montana notes that cattle prices have reached record levels.
Through mid-May, grain exports shipped from Duluth and Superior ran
three times higher than last year. But a director from Wisconsin
reports that dairy milk production has grown to levels that preceded
the federal herd buy-out program—a program intended to curb
excess production.