Beige Book Report: Minneapolis
June 23, 1987
In the second quarter the Ninth District's economy showed signs of continued improvement. Employment conditions strengthened early in the quarter. Consumer spending didn't grow by much, but neither did it weaken. Other improvements were noted in agriculture and resource-related industries—both of which have been weak spots in the district's economy.
Employment
The district's labor market continued to improve. In Minnesota,
seasonal job growth helped lower the unemployment rate to 4.6
percent in April. In the Minneapolis-St. Paul metro area, the
unemployment rate fell to 3.7 percent—its lowest April rate since
1979. Increases in non-manufacturing jobs in the Twin Cities offset
continued layoffs in manufacturing there. Also indicative of
continuing strength in Minnesota labor markets, initial unemployment
claims during May fell 8 percentage points below year-earlier
levels. In addition, the Minneapolis help-wanted advertising index
rose in April to a level 18 percentage points higher than a year
earlier, corroborating the view of Bank directors that the Twin
Cities labor market is tight.
Other district states also experienced heightened job growth. During April, employment rose and unemployment rates fell in the Dakotas and Montana. In South Dakota, durable goods manufacturing increased, and the April unemployment rate in the Sioux Falls metro area fell to only 2.7 percent.
Despite firm labor markets, relations between labor and management have been a concern at some major companies. A number of strikes have troubled the meatpacking industry and have affected 6,700 workers in South Dakota, Minnesota, Iowa, and Nebraska. One such strike is reported at a large meatpacking plant in Sioux Falls.
Consumer Spending
Retail spending on general merchandise grew moderately in recent
months. One large retailer reports that its combined sales for March
and April reached levels 10 percentage points higher than a year
ago. Another diversified chain reports a slightly larger increase
over the same months and notes that its sales promotions during May
were also well received by consumers. Although inventory levels have
not been too low, a few retailers mention that offshore deliveries
from Asia have been slow. One Bank director notes that the rate of
retail price inflation has been low. Bank directors continue to
report lackluster retail sales in smaller cities and towns dependent
on agriculture and oil extraction.
Motor vehicles sales have recently slowed. One large domestic manufacturer reports that its district sales were about 20 percent lower this May compared to May 1986. However, last May's sales were unusually high, so the recent decline wasn't overly severe. Another manufacturer says its late-May sales picked up and have been particularly strong in the Dakotas. Both manufacturers report that District inventories are normal for this time of year. Bank directors report that sales were slow in western parts of both Montana and Wisconsin.
Housing markets continued to be quite active in the district. In the Minneapolis-St. Paul metro area, housing permits were 17 percent higher during this year's warm April than in April 1986. Multifamily home construction was particularly strong. One Bank director notes that housing still remains affordable. But realtors are worried about future sales in light of recent increases in mortgage rates.
Agriculture
Agriculture conditions have continued to improve somewhat in recent
months. Crop conditions have been generally excellent, with early
growth stimulated by warm weather and recent rains. A Bank director
from North Dakota observes that conditions have been good through
much of that state—even in the usually dry area around Bismarck. In
Minnesota, most of the earlier moisture deficiency has been remedied
by recent rains. A Bank director from South Dakota notes that more
rain is needed in some parts of that state, though. Crop prices,
while still relatively low, have risen recently. Wheat prices have
increased particularly sharply, and corn prices have also increased.
These increases will save the federal government some money on its
farm payments programs.
Compared with major crop production, conditions for meat-animal production continue to be more favorable. In Minnesota, prices for May lambs were the highest on record. A Bank director reports that cattle prices were still good. And members of this Bank's Advisory Council on Small Business, Labor, and Agriculture report that the hog market looks promising through August, and that farm income generally is on the rise. In fact, a big hog production facility is planned for the area around Pierre, South Dakota.
Resource-Related Industries
Some good news is reported in most major resource-related
industries. Higher copper prices have helped the important White
Pine copper mine on Michigan's Upper Peninsula. Bank directors say
the gold mine there is also doing well and that two new gold mines
may open in South Dakota. Coal producers in Montana may be helped by
a cut in severance taxes. While the oil industry is still in the
doldrums, permits for oil-drilling increased a bit in North Dakota.
Finally, demand for many district wood products remains solid.