September 6, 1988
Ninth District economic conditions have remained stable. Employment prospects have stayed good. Consumer spending appears to have held up. Merchants contacted have not observed sharp price increases. Resource-related and agricultural industry conditions have remained largely unchanged.
Labor Markets
Recent tightness in the labor market has eased. Still, employment
prospects remain good. Minnesota's unemployment rate increased more
than seasonally in July, to 3.5 percent. This was primarily due to
stronger-than- expected labor force growth, though, as employment
remained higher than seasonally expected. In addition, initial
unemployment claims in Minnesota fell in July, to a level 5.6
percent below that of a year earlier. The most recent data indicate
that the unemployment rate in Montana has leveled off at 6.4
percent. And despite strong employment growth, North Dakota's
unemployment rate rose a bit in June, but was still 0.8 percentage
point below its level in June 1987. Seasonal construction and
tourism-related employment in Michigan's Upper Peninsula brought
that area's unemployment down to around 7 percent, well below that
of a year ago.
Consumer Spending
Consumer spending on general merchandise may have picked up a bit in
August. One retailer notes an increase during August, following a
lackluster July. Another district retailer experienced good sales
growth recently, led by strong sales of fall apparel. Inventories
are at acceptable levels. Retailers' outlooks vary, with some
predicting continuing strength while others (in the Fargo, North
Dakota, area) worry that recent strength may be coming at the
expense of lower activity later this year.
Motor vehicles have continued to sell well. One domestic line reports that its newer compact cars are selling particularly quickly. A domestic manufacturer notes that compact trucks are also a hot item, racking up double-digit sales increases for the month of July. With production going full bore, consumers will wait longer to take delivery on special orders this fall. Analysts contacted report good sales in such diverse locations as Billings, Montana, and Escanaba, Michigan.
The most recent statistics indicate that housing activity may be slowing a bit. Housing permits issued in the Minneapolis-St. Paul metropolitan area fell in June, dropping 14 percent below the number issued in June 1987. But 1987 was a banner year for Twin Cities homebuilding, with permit issuance comparable to Phoenix, Arizona. And Twin Cities sales of existing homes still rose above year- earlier levels during both June and July.
Tourist spending has continued to increase. Hot weather has helped attract tourists to cooler lakeshore areas. A tourism industry association reports a 30 percent increase in revenue for its members located on Lake Superior's North Shore, in Minnesota. According to local observers, tourist spending has been very good in the area around Pierre, South Dakota, and in the central part of the Upper Peninsula of Michigan. Forest fires are hurting visits to parts of Montana, though. Still, total tourist activity for the year in Montana has been high, and a newspaper editor comments that firefighting has brought employment to some unemployed workers and strikers.
Consumer Prices
Retailers of general merchandise report some wholesale price
increases. One chain says prices rose at most 5 percent this year,
with some goods actually declining in price. Food manufacturers have
increased prices for products made from grains. But two supermarket
chains believe retail competition will moderate the increase passed
on to consumers.
Resource-Related Industries
The wood products sector has continued to perform well, although
strikes have occurred at some Montana facilities. A furniture
manufacturer will start up an operation in northern Minnesota this
winter. Recently, ground was broken for a new paper machine in
Michigan's Upper Peninsula, where the operator of large iron mines
is expecting to report increased revenues following a small loss in
1987.
Agriculture
The condition of district agriculture has remained largely unchanged
from our last report. Only two Minnesota counties weren't declared
eligible for low-interest disaster relief' loans to farmers and
small businesses. One estimate indicates that Minnesota farmers will
receive an average of at least $6,400 per farm from recent federal
legislation to help relieve drought-induced financial problems. Low
water levels have created difficulties for joint sharing of some
Montana water resources by agricultural and tourist users.