November 3, 1993
Moderate growth continues to characterize the economy of the Ninth Federal Reserve District. Employment is growing modestly in all district states, and unemployment rates have declined slightly. Prices are stable, with no indication of inflationary pressures. Construction remains strong throughout virtually all areas of the district. Manufacturing is stable. Mining output is unchanged in spite of one iron mine closing, and there is increased oil exploration. The livestock sector shows good prices and output. But crop output is down sharply and spending by farmers has reportedly slumped. Retails sales of general merchandise vary across the district, although vehicle sales are up slightly. The summer tourist season turned out to be quite good in most areas.
Employment, Prices and Wages
Labor markets continue to show moderate improvement. Non-farm
employment in August and September continued above year-earlier
levels in all Ninth District states. Unemployment rates had declined
year-on-year in all states. Sioux Falls, S.D. a particularly tight
labor market, had an unemployment rate of 1.6 percent as businesses
report difficulty finding qualified help New claims for unemployment
in September were below month-earlier and year-earlier levels in
most district states. One iron mine in Minnesota was closed in
October, putting 700 miners out of work, and a telephone company
announced that it will lay off over 1,700 workers in four district
states.
There is virtually no sign of inflationary pressures. Food, general merchandise and energy prices show little change from a year ago. New wage settlements are said to include small increases. Unions are reportedly seeking employment stability and continuation of existing benefit levels rather than increases in direct wages. A director noted that one mining firm signed an unprecedented six-year contract that included wage increases of 2 percent or less per year.
Construction and Housing
Residential and light commercial construction is apparently the
strongest sector in the economy. New permits for single-family
housing in the Minneapolis-St. Paul area continue about 10 percent
above year-earlier levels, and industry spokespersons rate the
season as very good. Residential construction is also particularly
strong in South Dakota cities. Directors and newspapers report good
retail and other light commercial construction in Michigan's Upper
Peninsula, Montana, North Dakota and South Dakota. In Minneapolis-
St. Paul, commercial real estate markets and new construction are
reportedly good in suburban areas but continue weak in downtown
areas. In August, publicly awarded construction contracts in
Minnesota and the Dakotas dropped below year-earlier figures for the
first time in 1993, but strengthened in September. Awards that month
were 6 percent above year-earlier levels and year-to-date awards
were up 11 percent.
Manufacturing
Manufacturing shows moderate growth. Weather-adjusted electricity
usage by manufacturers continues to grow slightly above trend
levels. One director reported that manufacturing firms are investing
to replace obsolescent equipment or to improve productivity, but not
to expand total capacity. Publicly traded manufacturing firms
continue to report moderately improved revenues. A director noted
greatest strength in instrumentation and biomedical equipment, but a
slump in sales of goods for schools.
Natural Resource Industries
Metal mining output appears stable. Copper output in September and
October is apparently unchanged from earlier months in spite of
declining prices, but one Montana official warned that one mine may
halt production soon if some price upturn does not occur. An iron
mine in Minnesota was closed indefinitely following a strike, but
the owners said they would buy output from other mines in the area.
All other iron mines in the Lake Superior region now have signed
labor contracts. Gold production in Montana and South Dakota mines
continues above year-earlier levels and mine expansions are
reportedly under consideration.
Drilling rig counts are up significantly from 1992 in both North Dakota and Montana, and one firm had a very good strike near Dickinson, N.D. Several refineries in Minnesota and Montana are completing upgrading projects, and refineries across the district are reportedly running at full capacity. North Dakota coal production is down slightly over the year to date as a result of slack consumption by utilities over the cool summer.
Traditional lumber output is declining in South Dakota and Montana as a result of dwindling availability of timber. One small sawmill in Rapid City closed and a much larger Montana operation is scheduled to close soon. But plants in Minnesota, Wisconsin and Michigan producing wood-based lumber substitutes are reportedly running at full capacity.
Agriculture
There is a marked contrast between crop and livestock enterprises in
agriculture. As a result of adverse weather experienced throughout
the growing season, crops are poor in all Ninth District states with
the exception of Montana. The Agricultural Statistics Service
estimated on Oct. 1 that corn, soybean and wheat production for 1993
will be down from 20 percent to 50 percent from normal levels in
Minnesota and the Dakotas. Grain quality is generally poor, and
wheat producers in Minnesota and North Dakota have experienced great
difficulty in harvesting waterlogged fields. Edible bean production
in these areas is also down. The sugar crop reportedly shows average
yields in spite of harvesting difficulties. Montana is an exception
to the generally bleak crop situation; the 1993 wheat crop was 9
percent above the previous record and nearly 40 percent above 1992.
The Ninth District's latest quarterly survey of agricultural credit
conditions showed a sharp drop in bankers' estimates of farm income
and spending.
In contrast, output in the livestock sector, particularly for meat animals, has remained stable. Cattle prices, while still good relative to long-run trend, are declining somewhat, but slaughter numbers are above year-earlier levels. Hog prices are stable, with slaughter numbers down only slightly from 1992.
Consumer Spending
Available reports suggest little change in consumer spending on
general merchandise, with poor sales in eastern areas of the
district offsetting somewhat stronger sales in the west. One firm
with department stores in the eastern half of the region reports
that "sales are tough." And a Minnesota-based national retailer
describes same-store sales increases as "disappointing." But news
media and mall managers in regional centers in the Dakotas and
Montana continue to report good business. Vehicle sales are
reportedly above year-earlier levels in most states, though down
somewhat in North Dakota and areas of Minnesota and South Dakota
affected by flooding.
Tourism
Most of the district enjoyed strong late summer and early fall
tourist seasons. Casino visitors and campers boosted spending to
three-year highs in northern Michigan. Bridge officials at Mackinac
and Sault Ste. Marie report crossings up 8 percent and 3 percent,
respectively, during September and October in comparison to year-
earlier levels.
Northern Wisconsin resorts and restaurants report unusually heavy business for October, according to a chamber of commerce official. While outdoor activities saw modest improvement in Minnesota, tourist officials cite active shopping by visitors in Minneapolis- St. Paul.
A South Dakota tourism attraction reported a record year so far, with a 10 percent increase in business this fall compared to last year. Five consecutive years of record tourism in Montana probably ended this year, although inquiries were up 4 percent in September over year-earlier levels, according to tourist authorities. While totals didn't match last year's boom, North Dakota reported improvement in late summer.