May 5, 1993
The economy of the Ninth District is growing moderately. Consumer spending on merchandise, automobiles and new homes continues to grow and provide impetus for the economy. Moreover, other indicators signal that the recovery is firming. Commercial and heavy construction is reviving, with substantial state and local government projects slated for some areas. Recent indicators suggest some growth in manufacturing. In agriculture, cattle and hog numbers continue to rise in response to very favorable feed and slaughter prices. While current mining output is unchanged, industry officials predict an improved year for iron mining and profitability has improved for gold producers. Oil industry prospects ate positive for the first time in years. Cold, wet weather is severely delaying grain planting but has helped ensure that soil moisture levels are adequate across virtually all of the Ninth District. However, labor markets show slight growth in total employment coupled with steady to slightly higher unemployment rates.
Consumer Spending
Automobiles constitute one strong area of consumer spending. In
March, new registrations of passenger autos and pickups in Minnesota
were 6 percent above year-earlier levels. North and South Dakota
also report strong auto sales. "The first quarter has been very
good," said a South Dakota auto dealers association spokesperson.
Spending on general merchandise apparently continued at levels 3 to 5 percent above year earlier levels for the month of March and for the first quarter of 1993. A major Minneapolis-based general retailer characterized its March same-store sales, up 3.6 percent from a year earlier, as "disappointing" in comparison to increases achieved in January and February. However, such levels seem typical for much of the district. Advisory council members, Ninth District directors and newspapers generally also report good retail sales conditions but no spectacular growth. And the Minnesota Department of Revenue announced that sales tax receipts through the first quarter were above projections.
Construction and Housing
Heavy and commercial construction is strong. A trade publication
that tabulates construction industry data for all publicly-tendered
contracts in North Dakota, South Dakota and Minnesota reports that
contract awards for the first quarter of 1993 are 45 percent above
the first quarter of 1992. Some local units of government reportedly
will spend substantial amounts on construction in 1993, with $75
million announced for Sioux Falls. S.D. Directors and newspapers
also report substantial amounts of small and medium-scale commercial
construction that is not generally awarded through public bids.
New single-family bowing permits in February for Minneapolis-St. Paul remained below year-earlier levels but rose after declines the previous two months. And industry spokespersons across the district continue to describe residential construction as strong. A Minneapolis area builder's association representative characterized sales as "very strong" and a newspaper noted a building boom in the Sioux Falls. S.D., area. A district director from western South Dakota described the housing market in the Rapid City area as "very tight', noting that many new single-family residences were planned.
Manufacturing
Available indicators point to some growth in the manufacturing
sector. Minnesota's employment in manufacturing in February was
about 2 percent above year-earlier levels. Weekly hours in
manufacturing stood at 41.0, up slightly from the prior month and
nearly an hour above February 1992 levels. An electrical utility
serving most of the Ninth District manufacturing in South Dakota,
Minnesota and Wisconsin reported that weather-normalized electrical
use in industry grew at about 3.3 percent in the first quarter of
1993 compared to the same period in 1992. Food processing and non-
electrical machinery manufacturing showed the greatest increases.
And recent earnings reports of publicly-traded manufacturing firms
in the district show a pattern of sales and earnings generally well
above year-earlier levels.
Mining and Energy
Business conditions have improved somewhat in mining. One Minnesota
iron mining industry spokesman estimated that 1993 shipments would
be 2 million tons or 5 percent above 1992 levels. Recent price
increases have improved profitability in South Dakota and Montana
gold mining, and output and employment remain steady. Copper prices
remain low, but no new production cuts or layoffs have been reported
recently.
One high producing new oil well was completed near Dickinson. N.D. Ninth District directors from North Dakota and Montana report that oil companies show renewed interest in leasing and exploration and believe that with tight cost control, new production wells can be profitable at current oil price levels. Drilling rig counts for April are approximately equal to the same period in 1992.
Agriculture
Livestock are the most positive component in agriculture. Slaughter
cattle and hog prices are strong. Good fat cattle prices combined
with low feed costs have pushed feeder cattle prices to historic
highs, and earnings by ranchers in western South Dakota and Montana
are reported to be strong. Numbers of livestock on farms as well as
slaughter numbers are high. One problem is that cold, wet weather
has increased newborn calf mortality for beef producers.
The crop sector is still emerging from winter inactivity. Grain prices in mid-April are largely unchanged since February with the exception of an increase in the corn price. Unusually cool, wet weather has delayed field preparation and crop planting in all district states and for all major crops. Soil moisture levels are adequate to surplus across virtually all agricultural regions.
Labor Markets
In spite of indications of at least moderate growth in the sectors
reviewed above, labor markets show little significant change in
early spring. Indicators for February generally show slight
increases in total employment compared to month and year-earlier
figures combined with steady to slightly higher unemployment rates.
Minnesota, with over half of the district's labor force, had an
unemployment rate of 6.4 percent for February, one-half point higher
than in January and 1.1 points higher than a year earlier.
Unemployment rates also rose in South Dakota in spite of modest
increases in employment levels. Michigan's Upper Peninsula, where
unemployment rates have fallen 3 points in the last year to February
levels of 10 percent, is one region with improvement. In Minnesota
and the Dakotas, March initial claims for unemployment generally
rose from February levels but were somewhat below year-earlier
levels.
In spite of positive developments in the general economy noted above, such weakness in labor markets may continue due so ongoing processes of corporate restructuring and military downsizing that continue to affect the Ninth District. A large computer manufacturer announced that 700 full-time and 1,200 part-time or temporary workers will be laid off at its Rochester, Minn., plant out of a total of some 7,600 workers. And the Department of Defense announced that K.I. Sawyer Air Force Base, located in Michigan's Upper Peninsula, was on its list of facilities slated for closing. Sawyer AFB, with 3,300 military and 1,000 civilian personnel, is a major factor in Upper Peninsula employment and spending.