December 6, 1989
Ninth District economic conditions have been fairly good. The employment situation in the district has been favorable, with reports of shortages of workers for entry-level jobs. Consumer spending on general merchandise has been strong, automobile sales have continued to show large month-to-month fluctuations, and housing activity has continued at a moderate pace. Manufacturing activity has been mixed, and conditions in resource-related industries have been fairly good.
Employment
The district employment situation has been fairly good. Employers
throughout the district reported difficulty finding workers for
entry-level jobs even at wages well above the minimum wage. The
ongoing expansion of the mining industry in Montana created strong
demand for workers. Strong demand for workers was also reported from
lumber expansion projects in northern Minnesota and the Upper
Peninsula of Michigan and prison construction in the Upper
Peninsula. Nevertheless, skilled labor cost increases in the
district remained at a moderate 3 to 4 percentage point range, with
most of the increases due to fringe benefit costs. Unemployment
rates in the district were roughly unchanged in the reporting period
from the corresponding period a year ago.
Consumer Spending
Consumer spending on general merchandise has continued to be strong.
One retailer reports that October sales were 8.5 percent higher than
a year ago in comparable stores and total sales in October were 16.2
percent higher than in October 1988. An appliance retailer reports
that October sales in comparable stores were 5 percent higher than a
year ago. Inventories were reported to be at acceptable levels.
Retailers were cautiously optimistic about year-end sales.
Automobile sales have continued to show large month-to-month variability. Dealers for one domestic line report that sales in October were 25 percent lower than a year ago, but sales in the three-month period from August to October were up 25 percent from the same period a year ago. Inventories of cars and trucks were at unusually high levels. Reports indicated that conditions in the used car market were good.
Housing activity has been basically unchanged from last year's levels. The number of new housing permits issued in Minnesota in September was 10 percent lower than in August but roughly the same as in September 1988. In the Minneapolis-St. Paul metropolitan area, the number of new housing permits fell by 25 percent from August to September but was 3 percent higher than in September 1988. Housing sales in this metropolitan area in October were about 2 percent higher than in October 1988. A sharp reduction in construction of homes priced above $250,000 was reported. Considerable home remodeling activity was also reported. A director reports weakness in commercial construction in the Minneapolis-St. Paul area with few new projects being started and only previously committed projects going forward.
Tourist spending has continued to be strong. Tourist associations in the district report many inquiries for the upcoming season. Most areas near the Canadian border reported strong demand from Canadian shoppers and tourists.
Manufacturing
Manufacturing activity has been generally mixed. There has been
continued softness in the computer, electronics, and defense
industries. Suppliers to the aircraft and aerospace industries
report strong demand. Reports from the capital goods sector were
mixed. Most manufacturers report to be investing cautiously in
capital equipment, preferring to pay down debts unless the equipment
can reduce operating costs immediately. Lingering drought worries
also slowed equipment purchases by farmers in parts of the district,
although ranchers showed signs of increasing their investments in
capital goods. The expansion of the mining and lumber industries
contributed to the fairly good demand for capital investment in the
western and northern portions of the district.
Resource-Related Industries
Resource-related industries have been doing fairly well. Conditions
in agriculture were generally good, except in the western part of
North Dakota, where fall precipitation was sparse. In Montana, the
wheat and barley crop production was reported to have doubled over
last year's levels. Farmland values continued to increase; prime
corn and soybean lands in southern Minnesota sold for about $1,500
per acre, with some instances of sales at $2,000 per acre. These
prices are considerably higher than the depressed levels earlier in
the decade. Cattle prices were reported to be high, and ranchers
were optimistic about their prospects. Expansion in the lumber
industry was brisk with new construction and expansion plans in all
the lumber producing areas of the district. The mining industry also
reports strong activity.