Beige Book Report: Minneapolis
June 21, 1989
Ninth District economic conditions have been generally good. The employment situation has been fairly good throughout the district. Consumer spending has been generally strong, but housing activity has been weak. Conditions in resource-related industries have been good.
Employment
The employment situation has been fairly good throughout the
district. The unemployment rate in Minnesota in April was 4.7
percent, 0.2 percentage points higher than in March and 0.9
percentage points higher than in April 1988. The unemployment rate
in the Minneapolis-St. Paul metropolitan area rose to 3.8 percent in
April, compared to 3.5 percent in March and 3.0 percent in April
1988. The Minnesota State Government predicts that the closing of a
large computer manufacturer's supercomputer division located in St.
Paul will have major effects on employment in the state. The state's
analysis suggested that, aside from the 800 jobs lost directly from
the closing, 3,000 additional jobs could be lost from companies who
supplied the division. A large local company engaged in the travel
and hospitality industries reported that it expected to add about
1,000 jobs in the state. Some observers noted that while wages were
edging higher for some entry-level service sector jobs, there was no
evidence of any sizable increase in wage rates.
The unemployment rate in North Dakota fell to 4.5 percent in April from 5.2 percent in March and 5.0 percent in April 1988. The unemployment rate in South Dakota dropped to 3.5 percent in April from 4.2 percent in March and 3.7 percent in April 1988. The unemployment rate in Montana dropped to 6.1 percent in April from 7.6 percent in April 1988; in the Upper Peninsula of Michigan the unemployment rate in March was 10.5 percent compared to 11.7 percent in March 1988.
Consumer Spending
Consumer spending on general merchandise has continued to be fairly
strong. One retailer reported that sales in May were 15.0 percent
higher than a year ago; year-to-date sales were 16.0 percent higher
than for the comparable period a year ago. Another retailer reported
that sales in May were 6.1 percent higher than in its comparable
stores a year ago. Inventories were also reported to be at
acceptable levels.
Automobile sales recovered from low levels in the first quarter. Dealers for one domestic line reported that car sales were 19 percent higher and truck sales were 11 percent higher this May than a year ago. However, year-to-date sales of cars were only 2.5 percentage points higher and truck sales were 0.3 percentage points lower than in the comparable period last year. Sales of boats and other recreational equipment were reported to be sharply lower, with one dealer stating that April and May sales were the lowest in 20 years.
Housing activity was sharply lower than a year ago. The number of new housing permits issued in Minnesota in April was 26 percent lower than in April 1988. The number of new housing permits issued in the Minneapolis-St. Paul Area was 33 percent lower in April than a year ago. May home sales in the Minneapolis-St. Paul Area were 33 percent lower than in May 1988, though they were only 10 percent lower on a year-to-date basis. Contracts for future residential and nonresidential construction did not suffer as sharp a decline as did housing. The dollar value of such contracts was about 3 percent lower in May than in May 1988 and was approximately the same on a year-to-date basis.
All our contacts reported expectations of a strong tourist season. North Dakota, South Dakota, and Montana are celebrating their centennial year as states in the Union and were reported as expecting a good tourist season. One observer speculated that Yellowstone would draw many visitors curious to see the aftermath of last year's fire. Most of the tourist resorts in the Wisconsin Indianhead area reported being booked through October and reported the fishing season to have gotten off to a good start.
Resource-Related Industries
Conditions in resource-related industries have been good. North
Dakota is expected to have a record grain crop. The winter wheat
crop was excellent and, because the drought lowered yields in
Kansas, it is expected that North Dakota will have the highest yield
in bushels per acre in the country. A director described the winter
wheat crop in South Dakota to be in pretty good condition. The
subsoil moisture levels throughout the district were described as
adequate to fairly good. Mining activity has been good; a director
reported that a mining company in Montana was considering plans to
start the world's largest silver mine. In the Upper Peninsula,
feasibility studies on opening new copper mines were reportedly
started. The wood products industry reported severely limited access
to lumber due to environmental concerns. In Montana, wood products
output declined by 11 percent in the first quarter of this year
compared to last year; this was primarily attributed to raw material
shortages.