Beige Book Report: Minneapolis
January 24, 1990
Ninth District economic conditions have been moderately good. The district employment situation has been mixed. Consumer spending on general merchandise has been strong, automobile sales have continued to show large month-to-month fluctuations, and automobile inventories have been at unusually high levels. Resource-related industries have been doing moderately well.
Employment
The district employment situation has been mixed. The unemployment
rate in Minnesota in November was 3.5 percent, 0.2 percentage points
lower than in October but 0.3 percentage points higher than in
November 1988. In the rest of the district, unemployment rates rose
from October to November and were at slightly higher levels than in
November 1988. Employment levels continued to decline in the
computer and electronics industries in the Minneapolis-St. Paul
metropolitan area with one manufacturer of mainframe computers
eliminating 2.5 percent of its metropolitan area workforce in
December. The labor market situation has been brighter district-wide
for entry-level workers, with employers continuing to report
difficulty in filling entry-level jobs. Most employers contacted
expressed concern about rapidly increasing costs for health
insurance.
Consumer Spending
Consumer spending on general merchandise has continued to be strong.
One retailer reports that, in the five weeks ending December 30,
total sales were 15.1 percent higher than a year ago, and 7.3
percent higher at stores that have been operating for at least a
year. An appliance retailer reports that total sales in December
were 21 percent higher than a year ago, and 5 percent higher at
stores which were open in December 1988. The retailers contacted
generally report that Christmas sales were much better than
expected. Inventories were at acceptable levels.
Automobile sales have continued to show large month-to-month fluctuations. A domestic manufacturer reports that car sales in the region in December were 8 percent lower than a year ago, while truck sales were 13 percent higher. This manufacturer also reports that regional car sales for all of 1989 were 3 percent higher than in 1988. Inventories of cars and trucks have continued to be at unusually high levels, but it is anticipated that by March inventories will return to normal.
Housing activity has been largely unchanged from last year's levels. The number of new housing permits issued in Minnesota rose by 4 percent in November from last year, but the number of new housing permits issued in the Minneapolis-St. Paul metropolitan area fell by 11 percent over the same period. Housing sales in this metropolitan area in December were 7.4 percent higher than in December 1988, but sales for the entire year of 1989 were roughly unchanged from 1988 levels. Construction activity levels were also roughly unchanged from a year ago. The dollar value of contracts for future construction in November was about 5 percent higher than in November 1988.
Tourist spending has been moderately strong. Montana reports an outstanding year, with reservations at ski resorts up anywhere from 10 to 20 percent over last year. The Upper Peninsula of Michigan also reports good snowfall and an excellent tourist season. Elsewhere in the district, snowfall has been below normal and ski resorts report a disappointing season. In Deadwood, South Dakota, gambling was recently legalized and the amounts wagered have exceeded all expectations.
Resource-Related Industries
Resource-related industries have been doing moderately well.
Conditions in agriculture have been fairly good in the district
except for parts of North Dakota, where a continuing drought caused
declines in the output of wheat. However, the barley and sugar beet
crops in North Dakota were reported to be good. A director reports
that in some parts of North Dakota farmers' net worth declined by
about 10 percent in 1989. Livestock dealers and ranchers throughout
the district report to have had a good year. The lumber industry in
the district has been doing well, although concerns have continued
to be expressed about the long-term outlook of the industry due to
environmental restrictions. The mining industry reports an
exceptionally good year, particularly in Montana, where several
expansion projects of copper mines are in progress.