Beige Book Report: Minneapolis
December 1, 1986
Moderate growth appears to have continued this fall in the Ninth District. Labor market conditions have held firm, as have most types of consumer spending. Aggregate nonresidential construction has held up, as has the district's important wood products sector. The agricultural outlook has been brightened by the likelihood of big crops and their attendant government payments. But farm bankruptcies have not abated.
Employment
Ninth District labor markets have not weakened recently. The
Minneapolis-St. Paul help-wanted advertising index rose 2.7 percent
in September. District unemployment rates did not rise significantly
in September. Minnesota's unemployment rate fell a bit, to 4.2
percent, while its Twin City area rate rose a bit, to just 3.7
percent. At the same time, additional hiring in durable goods
manufacturing helped bring South Dakota's unemployment rate down to
3.6 percent. Total employment declined somewhat in both Montana and
North Dakota, but the unemployment rate rose only slightly in the
former and fell in the latter.
Still, Twin City manufacturing employment continues to be affected by the problems of its large multinational manufacturers. One of those recently announced that 1,000 of its 19,000 area employees will be laid off by January.
Consumer Spending
Retail spending on general merchandise has held up well recently,
reflecting the national trend. One large chain reports its October
sales up 12.4 percent from a year ago and its November sales also
good. Inventories are in good shape. A banker reports that another
chain operating throughout South Dakota has had good October and
November sales too. But Bank directors continue to report the
problems of small town, "Main Street" retailers in farm areas.
Motor vehicle sales have also been consistent with the national trend; they have fallen off recently after big gains earlier this fall. The district office of one domestic manufacturer notes that this October its car sales dropped 4.2 percent below last October's level. Another manufacturer reports a similar pattern, but notes that its inventories are still low.
Bank directors and members of the Ninth District Advisory Council on Small Business, Agriculture, and Labor report healthy levels of tourist spending in most district tourist areas. They say summer spending was generally higher than last year, as expected, and most are expecting winter business to be brisk.
Housing activity has slowed from its rapid pace earlier in the year. Minnesota's Twin City area home sales were lower this October than last. Over the same period, multifamily housing starts were also lower there. A banker reports that bad weather slowed housing activity in South Dakota as well. But a Bank director notes that the demand for seasonal dwellings in Minnesota resort areas has been good.
Construction
In contrast to housing, the steady pace of nonresidential building
has continued. Reflecting higher demand for space, the vacancy rates
for both commercial office and industrial buildings in the
Minneapolis-St. Paul metropolitan area fell between June and
September. In fact, nonresidential building contracts in Minnesota
were 64 percent higher this September than last. A Bank director
notes an unusually large number of big construction projects in and
around Duluth, Minnesota. And while a labor leader in North Dakota
reports that construction activity in North Dakota has fallen
overall, recent activity has included some public works and
military-related construction.
Resources
Resource-related industries have continued to show a wide range of
performance. The large and growing wood products sector continues to
do quite well. A Bank director reports that paper mills in the
northeastern part of the district are running at full capacity. Pulp
prices are quite firm and may rise more. He notes that waferboard
plants are also running full and that competition from new plants
may create problems for existing wood products plants in this
district. An open pit copper mine employing 300 is now operating in
Montana, and the important White Pine copper mine in the Upper
Peninsula of Michigan is now doing a little better than breaking
even. But both iron and oil extraction are still at low levels, with
an uncertain future.
Agriculture
Big crops and government payments are brightening overall
agricultural conditions. A record or near-record corn crop is being
reaped in Minnesota. A Bank director expects government payments on
the excellent wheat crop in Montana to help the hard-pressed wheat
farmers there. One respondent cites the potential economic stimulus
inherent in the $670 million government payments to North Dakota.
However, a South Dakota banker believes that farmers are going to
use a lot of income just repaying debts and increasing their
depleted savings. And several respondents note that farm
bankruptcies are still rising in parts of the district.