September 20, 1989
Ninth District economic conditions have been mixed. The Minnesota labor market has continued to display signs of weakness, while the employment situation in the rest of the district has improved. Consumer spending on general merchandise has been strong, automobile sales have risen sharply from levels earlier in the year, and housing activity has shown signs of improvement. Conditions in resource-related industries have been mixed.
Employment
The district employment situation has continued to be mixed, with
signs of increasing unemployment in Minnesota. The unemployment rate
in Minnesota in June was 4.9 percent, 0.6 percentage points higher
than in May and 0.8 percentage points higher than in June 1988. The
unemployment rate in the Minneapolis-St. Paul metropolitan area was
4.4 percent in June, up from 3.9 percent in May and 3.0 percent in
June 1988. Manufacturing employment, in particular, has been
stagnant since June 1988. Analysts attribute the lack of growth in
manufacturing employment to the problems experienced by area firms
in the computer and electronics industries. The one bright spot is
the growth in employment by firms specializing in advanced medical
technologies.
The unemployment rate in North Dakota declined to 3.8 percent in July from 4.6 percent in June and 4.4 percent in July 1988. The unemployment rate in South Dakota was 4.0 percent in July, 0.2 percentage points lower than in June and 0.5 percentage points higher than in July 1988. In Montana, the unemployment rate fell to 5.2 percent in July, from 6.0 percent in June and 6.5 percent in July 1988. The unemployment rate in the Upper Peninsula of Michigan dropped to 6.0 percent in July from 7.5 percent in June.
Consumer Spending
Consumer spending on general merchandise has continued to be strong.
One retailer reports that August sales were 19 percent higher than a
year ago and 8 percent higher on a year-to-date basis. This retailer
said that sales were the best they had been in a long time. Another
retailer reports that sales in August were 5.1 percent higher than a
year ago, and year-to-date sales were 5.7 percent higher than last
year. Inventories were reported to be at acceptable levels. All of
our contacts were optimistic about fall and Christmas sales.
Automobile sales have continued to recover rapidly from a poor first quarter. One domestic manufacturer reports that sales in the Minneapolis-St. Paul metropolitan area in August were 25 percent higher than in August 1988 and were about even on a year-to-date basis compared to last year. Another domestic manufacturer reports that sales in the Minneapolis-St. Paul metropolitan area were 22 percent higher in August than in August 1988 and 5 percent higher on a year-to-date basis. Automobile dealers were generally optimistic about sales prospects for the new model year.
Housing activity has also rebounded from its depressed levels earlier in the year. In Minnesota, the number of new housing permits issued in June was roughly the same as in June 1988. Earlier this year, the number of new housing permits issued was as much as 30 percent below the levels of last year. Housing sales in the Minneapolis-St. Paul area were 6.3 percent higher in August than in August 1988 but 3.4 percent lower on a year-to-date basis. Nonresidential construction has not fared as well. The dollar value of contracts for future construction in the Minneapolis-St. Paul metropolitan area was 25 percent lower in July than in July 1988 and about 15 percent lower on a year-to-date basis.
Tourist spending has been fairly strong. North Dakota, South Dakota, and Montana have been celebrating their centennial year as states in the Union, and all three states report very good tourist seasons. One observer reports that in some areas of Montana it was nearly impossible to find lodging. The city of Northfield, Minnesota, anticipates that over 100,000 people will turnout for its annual "Defeat of Jesse James Days," the reenactment of the shootout between the citizens of Northfield and the James Gang in 1876.
Resource-Related Industries
Conditions in resource-related industries have been mixed.
Agricultural conditions in Minnesota improved since our last report.
It was reported that in early September 62 percent of Minnesota
farmland had adequate or surplus moisture. This report was an
improvement over earlier reports that over half the farmland was dry
or very dry. The spring wheat harvest in Minnesota was projected to
be 91 percent higher than the drought-affected levels of a year ago.
An index of prices received by Minnesota farmers was 6 percent lower
in August than in August 1988. In North Dakota, it was estimated
that 60 to 65 percent of the spring wheat harvest was lost this year
due to unseasonably hot weather and grasshopper infestation. The
mining industry throughout the district reports to be doing well.
Gold mines in Montana are having a good year. Manufacturers of heavy
equipment used in mining also report an excellent year. A platinum
mine in Montana plans to expand operations. The lumber industry in
the district continued to report difficulties in securing enough
timber.