Beige Book Report: Minneapolis
September 18, 1991
The Ninth District continues to feel the effects of the national recession. Labor market conditions have improved slightly, though employment growth has been weak. Retail sales have showed only moderate growth, and automotive sales continue to be slow. Conditions in the manufacturing and resource-related industries very mixed. Tourism was the major bright spot.
Employment Wages, and Prices
Labor market conditions improved in most of the District.
Minnesota's July unemployment rate fell to 4.4 percent from 4.8 the
previous month, and below the year-ago rate of 4.9 percent.
Unemployment rates fell in July, relative to their June levels, in
Montana (6.1 percent from 6.4), North Dakota (3.9 percent from 4.2)
and the Upper Peninsula of Michigan (8.6 percent from 9.2), but in
all three cases remain above their year-ago levels (5.0, 4.0. and
7.7 percent, respectively). In South Dakota, the unemployment level
in July rose 0.1 percentage point from June to 3.2, but remains
substantially below its year-ago level of 3.6 percent. On a
cautionary note, the preliminary level of Minnesota's initial
unemployment claims was 20 percent higher in August than its year-
ago level. Changes in the July unemployment rates from year-ago
levels were mixed in western Wisconsin. The growth in
nonagricultural employment in July from year-ago levels was an
anemic 0.52 percent in Minnesota and 0.83 percent in Montana, but a
robust 1.41 percent in North Dakota and a whopping 2.74 percent in
South Dakota. In a number of sectors of the Minnesota economy July
employment levels fell, relative to their year-ago levels:
manufacturing down 1.24 percent, construction down 6.14 percent,
transportation down 0.44 percent. Only in the FIRE (finance,
insurance, real estate), services, and government sectors did
Minnesota's employment rise substantially in July, relative to its
year-ago levels: 1.69, 3.28, and 0.54 percent respectively. In
Montana, the weak employment growth was due in large part to a sharp
fall in mining employment, down 6.06 percent in July from its year-
ago level.
Consumer Spending
Retail sales in the District were mixed. Sales tax receipts in
Minnesota were down 6.25 percent in July relative to year-ago
levels. Major retailers in the District report August sales
increases of comparable stores, relative to year-ago levels, ranging
from 1 to 13 percent with discount stores generally reporting the
largest increases. Retail sales have been strong in Montana, North
and South Dakota, and the Upper Peninsula of Michigan, which
continue to reap the benefits of the influx of Canadian shoppers.
District new car sales continue to be weak, with one major domestic auto company reporting car sales declines of 15 percent in August and 22 percent for the year to date, relative to a year ago. Used car prices remain high.
Housing sales remain somewhat weak in the District. In the Minneapolis-St. Paul area existing home sales were up 4.1 percent in July relative to a year ago, after falling in June. The June drop was attributed to a change in the terms of FHA-insured loans. The price increase of the median-priced home in the Twin Cities area rose 2.1 percent in the second quarter over a year ago, continuing the trend of the 1980's in which existing home prices in Minnesota have failed to keep pace with inflation.
Tourism activity has been excellent in all parts of the District. The number of crossings over the Mackinac Bridge onto the Upper Peninsula was up 3.3 percent for the first eight months of this year and 6.9 percent in August, relative to a year ago. Crossings over the International Bridge between the Upper Peninsula and Canada were also up 3.8 percent in August relative to their year-ago level. There has been a substantial increase in tourism at Mount Rushmore due in part to its recent fiftieth anniversary celebration.
Construction and Manufacturing
Conditions in the District's construction industry have been mixed,
with the overhang of office space in the Minneapolis-St. Paul area
expected to continue to depress commercial activity in the area. The
value of future construction contracts in the Twin Cities area
remains above year-ago levels. However, the July level of new
housing permits was down 15 percent.
The Minnesota index of economic activity rose to an all-time high in June, up 1.2 percent from May and 1.5 percent from its year-ago level. However, new business incorporations were down sharply in August, only slightly higher than their year-ago level, while average weekly hours in July were slightly below their year-ago level, and manufacturing employment was down 1.3 percent over the same period.
Resource-Related Industries
Crop yields in the District are expected to be generally good.
However, prices are sharply down. The mid-July level of the
Minnesota index of all farm products fell 13 percent relative to its
year-ago level, with crop and dairy prices falling by 18 percent,
and livestock prices falling by 6 percent. The only bright spot was
poultry and egg prices which rose 6 percent over this period. Milk
prices are reported to be below the break-even point.