Beige Book Report: Minneapolis
August 3, 1987
The district economy has continued to improve this summer. Strong seasonal employment growth has helped many parts of the district, causing a general decline in state unemployment rates. Consumer spending has grown modestly, while housing activity may be starting to pick up a bit again. The tourist industry, a major summer employer, has done well so far this summer. The agricultural sector has at least done better than last year, thanks to warm weather, high livestock prices, and income from government farm programs.
Employment
Labor market conditions have improved in early summer. Most district
states report good seasonal employment growth and unemployment rate
declines during May. In South Dakota, the unemployment rate fell
from 4.1 percent in April to 3.5 percent in May, while in North
Dakota, the rate dropped from 5.2 percent to a historically low 4
percent. Preliminary May estimates from Montana also indicate a
healthy decline in its unemployment rate, down more than a full
percentage point from April and down two percentage points from May
1986. Statistics from the Upper Peninsula of Michigan are
particularly heartening, they show a three percentage point drop in
its unemployment rate between April and May coupled with a sizable
increase of 3,300 jobs over the last year. And while both
Minnesota's nonfarm employment and its unemployment rate
deteriorated a bit during May, its Minneapolis-St. Paul metro area
continued to register improvement in both statistics.
Consumer Spending
Retail sales of general merchandise have continued to grow
moderately. One retail chain reports sales 14 percent higher this
June than last. Its recent sales promotions did quite well. Its
inventories are at acceptable levels, and management is optimistic
about fall business. Scattered reports from cities around the
district indicate that retail sales are holding up in Sioux Falls,
South Dakota, as well as in Missoula, Montana, where a new large
discount store is slated to open this August.
Motor vehicle sales seem to be picking up. One domestic manufacturer experienced its best June sales ever in this district. While its inventories are still a bit high, its dealer profits have been good. A large Twin Cities dealer of another domestic manufacturer reports that its recent sales have been quite good, too. Directors of this Bank's branch in Montana give mixed reports about auto sales in their hometowns.
Housing activity may have rebounded a bit recently. After a 22 percent drop in May, Minneapolis-St. Paul home sales posted a 9.5 percent gain in June over the level of June 1986. Sales for the second quarter were still around 20 percent lower than a year earlier, though.
Tourism
The tourist industry, a major contributor to the summer economy
throughout the district, has done well so far. Despite a few
incidents with grizzly bears, the number of visits to major tourist
attractions in Montana was 4 percent higher this June than last,
leaving the year-to-date number up 6 percent. Reservations for the
rest of the year are also ahead of a year ago. Attractions in the
Black Hills area of South Dakota report 15 to 20 percent increases
over last year. During one week in June, a caravan of Airstream
homes brought 7,000 people to that area. Industry representatives in
western North Dakota report activity up about 10 percent this June.
Good reports also come from most areas in the Upper Peninsula of
Michigan. Traffic into the Upper Peninsula over the Mackinac bridge
this July is running ahead of last year's record level.
Agriculture
Agricultural conditions have continued to improve. Prices of farm
commodities have continued to rise. The Minnesota farm price index
rose in June to a level 3 percent higher than in May and 4 percent
higher than in June 1986. Meat prices account for much of the
increase, as beef cattle prices reached their highest level in eight
years. Government land idling programs have helped lower plantings
of major crops currently in excess supply. For example, corn acreage
in Minnesota is now at its lowest level since 1983. Income from
livestock sales and a variety of government agricultural programs
led to an increase in district farm income during the second
quarter, according to this Bank's survey of agricultural bankers.
This survey also shows that the higher farm income helped farmers
service their bank debt, which has improved the portfolios of
agricultural banks. Unseasonable warmth has helped row crops to
develop very rapidly, but it has also led to moisture stress in some
parts of the district. And some areas are having problems with
grasshoppers and hail.