May 2, 1990
Ninth District economic conditions have been moderately good lately. Labor markets have been fairly tight, but wage and price increases have been moderate. Retail sales have been strong, but new car sales have been slow. Credit conditions have tightened moderately. Resource-related industries have generally been doing well. However, farmers still fear that, without good spring rains, another drought is possible.
Employment, Wages and Prices
Labor markets have remained fairly tight throughout the district.
The unemployment rate in Minnesota was 4.7 percent in February, down
from 4.9 percent a year earlier. February unemployment rates in the
rest of the district were also lower than a year earlier. In
particular, Montana's unemployment rate, at 5.9 percent, was sharply
lower than the 7.6 percent rate of February 1989. In Minnesota's
Minneapolis-St. Paul area, job cutbacks in the computer and
electronics industries were offset by strong growth at medical
technology firms. District-wide, manufacturing employment in
February was slightly ahead of a year ago.
Wage and price increases have remained moderate in the district, except for continued high growth in health care costs. Recent and prospective increases in minimum wages are not expected to have much of an impact here because shortages of entry-level workers and teenagers have already forced up their wages.
Consumer Spending
Retailers have continued to report strong sales throughout the
district. Sales in March ranged from 4 to 8 percent ahead of last
March. One retailer calls Easter sales "spectacular." Inventories
are reported to currently be at acceptable levels. But retailers in
small towns have continued to lose business to regional shopping
malls. Shopping centers near the Canadian border report
exceptionally strong demand from Canadian shoppers.
New car sales have continued to be soft, but the used car market is reportedly strong. Most district dealers report that, even with the softness in new car sales, they are doing considerably better than the nationwide figures suggest.
Housing sales have showed considerable variation around the district. In the Minneapolis-St. Paul area, housing sales were 15.4 percent higher than a year ago in March alone and 16.2 percent higher than a year ago in the first quarter. In parts of North Dakota, however, housing markets are said to be very slow and prices sharply lower. The number of new housing permits issued in Minnesota in February was 11 percent lower than a year earlier. Much of this decline is concentrated in the Minneapolis-St. Paul area, where the number of new permits fell 21 percent.
Tourist activity has also been varied across the district. In the Upper Peninsula of Michigan, the ski season was shortened by a somewhat earlier-than-normal melting of snow. Most contacts report that they are optimistic about tourism prospects for the summer. The legalization of gambling in Deadwood, South Dakota, has caused property values there to increase several times over.
Credit Conditions
While credit appears to have tightened modestly in the Ninth
District, there are no signs here of a "credit crunch." Real estate
developers report increasing difficulty in obtaining credit from
their traditional sources of funds, the savings and loans. Most
contacts report that lending to their own businesses has not
significantly changed. However, these contacts also report closer
scrutiny of collateral and downpayments by banks. Bankers in farm
areas report increased competition from the Farm Credit System for
agricultural loans.
Resource-Related Industries
Mining remains one of the strongest sectors in the Ninth District
economy. Precious metal mines in Montana, in particular, have
continued to expand. Technological developments in underground
mining have created new interest in reopening previously abandoned
mines. The district's forest product industries have remained
strong. Environmental concerns have continued to affect proposed
expansion in both the mining and lumber industries.
Farmers in most of the district are still concerned about the lack of soil moisture. The one bright spot is Montana, where recent rains are reported to have increased soil moisture to the best level in several years. Winter wheat losses have been smaller than feared, thanks to a mild winter. Cattle prices are now reported to be high, and ranchers are generally optimistic about their prospects for the rest of the year. Rental rates for pastureland are said to have risen sharply. Land prices in the district are continuing their steady recovery from the depressed levels of a few years ago.