October 18, 1988
Ninth District economic conditions have remained stable at satisfactory levels. Unemployment rates have not changed much. Consumer spending has been fairly healthy while inflation rates continued to be moderate. Conditions in resource-related industries have improved, and those in agriculture have remained largely unchanged.
Labor Markets
The employment situation has been reasonably good throughout the
district. Between July and August, Minnesota's unemployment rate
rose only one-tenth of a percentage point, to 3.6 percent; this is
substantially lower than the 5 percent rate of a year earlier. In
July, the help-wanted advertising index for the Minneapolis-St. Paul
area was up 9.4 percent from a year earlier. South Dakota's July
unemployment rate was unchanged from its year-ago rate of 3.7
percent. However, initial claims for unemployment insurance in that
state were down 30.9 percent from a year ago. The unemployment rate
in North Dakota, at 4.1 percent in July, was three-tenths of a
percentage point lower than a year earlier. In Montana, the need for
fire fighters substantially improved employment prospects. And in
the Upper Peninsula of Michigan, the unemployment rate was down to
5.7 percent in July, a full percentage point below a year earlier.
Consumer Spending
Consumer spending on general merchandise has remained strong, and
the prospects are promising. One retailer notes that, in the
January-August period, sales at comparable stores were 25 percent
ahead of a year earlier. Another retailer notes that, after a soft
year in 1987, apparel sales are coming back strongly. Inventories
are at acceptable levels. Retailers are optimistic about this year's
Christmas sales.
Motor vehicles have been selling well. In particular, truck and van sales are reported to be up sharply over last year. One manufacturer of a domestic line reports that, even at full capacity, demand cannot be met. New models are generally expected to sell well.
Housing activity has been mixed. The number of homes sold in August in the Twin Cities area was 12.4 percent below the banner sales of a year ago. However, new housing permits issued in the whole state of Minnesota were up 9 percent during that period.
Tourist spending has also continued to increase. Despite the drought, the fall colors are an attractive sight throughout the district. Most areas contacted in Minnesota indicate good resort business, as do those in the Upper Peninsula of Michigan. In Montana, however, the fire at Yellowstone has kept the number of August tourists 7 percent below a year ago. Still, one observer thinks that a sizable number of tourists have actually been attracted by the fire.
Consumer Prices
Consumer price increases have been moderate. Retailers report some
price increases as they switch increasingly from foreign to domestic
buying of general merchandise. However, one retailer expects to see
a slight decrease in prices of imported apparel. The drought has not
affected food prices very much yet. In June, the consumer price
index for the Twin Cities area was 6 percent above a year earlier.
Resource-Related Industries
Conditions in the district's resource-related industries have
improved. Strikes in the wood products sector of Montana have ended.
Copper mining in Montana is also picking up, with one analyst
suggesting that, in the Butte area, 2,500 new jobs might be added
through 1989. Approximately 2,500 new jobs have already been added
in the last two years by gold mining operations in Montana. It the
copper forecast is accurate, mining employment in Montana will reach
1983's high level. The timber industry in Michigan's Upper Peninsula
is also reporting a good year, with a new mill due to begin
operating in 1990 and other mills significantly upgrading their
facilities.
Agriculture
If rainfall returns to or exceeds normal levels, the effects of the
drought on the district's agriculture sector may be milder than
expected. Drought aid will significantly mitigate the effects on
farmers' incomes. One analyst suggests that a farmer who normally
expects to gross $139 per acre will instead receive $137 per acre in
aid if the farmer's crop was completely destroyed. Low water levels
in eastern Montana, western North Dakota, and northwestern South
Dakota continue to pose same problems for cattle ranchers. But the
sugar beet crop in North Dakota and Minnesota is reported to be
excellent in spite of heavy rains at harvest time.