Beige Book Report: Minneapolis
August 6, 1985
District labor market conditions haven't worsened lately, despite the deepening agricultural crisis. Consumer spending appears to have slackened, though, particularly in drought-plagued agricultural areas. Summer construction and tourist spending have helped many district states weather the lack of storms.
Employment
Labor market conditions have continued to show general improvement.
Minnesota's seasonally adjusted unemployment rate declined further,
reaching 5.1 percent in June. Between May and June, initial
unemployment claims in Minnesota fell 4.8 percent. In June, for the
first time in four months, that state's economy created more
manufacturing jobs than were seasonally expected. This brought
Minnesota's total employment growth over the previous 12 months to
3.4 percent, the same as the nation's. Furthermore, despite
agricultural sector woes, North Dakota's unemployment rate has been
around 6 percent, while Montana's fell to an estimated 6.7 percent
in June, despite an increase in its Billings area rate. Large retail
chains opened new stores in St. Cloud, Minnesota; Brooklyn Center,
Minnesota; and Bismarck, North Dakota. But in late June another
taconite plant, employing 450 people, closed in the hard-pressed
area of northeastern Minnesota.
Consumer Spending
Retail sales of general merchandise have slowed in the district. A
retail chain reports that June sales have been not up to its
expectations, although its July sales have been pretty much on
target. Its inventories aren't excessive. A grocery chain also
experienced somewhat lower sales recently. This Bank's directors
generally report flat sales, due in large part to agricultural woes
throughout the district.
Sales of motor vehicles have been seasonally slow, as consumers wait for new models to cone out. Reflecting this, one domestic manufacturer reports that both car and track sales were off in July. Another manufacturer reports higher June truck sales, though. Both manufacturers have more than adequate inventories.
Home sales have been strong lately in the Minneapolis-St. Paul area. There home sales in June were 20.7 percent above their high levels of a year earlier. At the same time, though, in North Dakota new housing starts were up only about 2 percent, and district Bank directors haven't reported much home building activity in agricultural areas.
Tourist expenditures have been generally up. Through June, inquiries at Minnesota state tourism offices were 27 percent ahead of last year. The big, multipurpose resorts are doing better than the small fishing resorts. A Bank director reports that a national park in North Dakota was busy in June, being visited by more people this year than last. A director from Montana notes that tourism to Yellowstone Park was up 18 percent this year. Finally, a bakery which serves northwestern Wisconsin and parts of the Upper Peninsula of Michigan reports that its sales were up, a good indicator of overall tourist expenditures in its service area.
Construction
Construction activity has helped buoy employment levels throughout
the district. Ground was broken for yet another large office/retail
complex in downtown Minneapolis, which is to add 1.25 million square
feet of office space to the city's 14 million square feet of
existing space. Twin Cities area commercial contractors now believe
that activity will stay high into 1986. Public construction projects
have provided jobs in Duluth, Minnesota; Rapid City, South Dakota;
and parts of North Dakota and Montana.
Agriculture
Due to extreme dryness, the agricultural scene in Montana is a
"total disaster," according to a Montana director, and is analogous
to problems in the western Dakotas. Grasshoppers have been
destroying whatever the drought has weakened. (According to experts,
an average of eight grasshoppers per square yard on a 10-acre plot
will eat the same amount of forage as one cow.) Crop insurance
should be of some help to the stricken farmers, though. Also, the
resulting lack of pasture land (due to both the drought and the
grasshoppers) has hurt livestock operations, which have had to sell
a lot of cattle as a result. A director reports that live cattle
prices are now at their lowest levels since 1978, in part due to
slack meat demand.
Farmers in less heat-stressed parts of the district are still suffering from low prices. The Minnesota farm price index finally steadied in July, but still remained 14 percent below list July's level. A recent decrease in milk price supports is expected to cost Minnesota dairy farmers around $50 million a year. Milk prices in Minnesota in July were the lowest in five years.