September 17, 1997
Federal Reserve Districts
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The mood is upbeat as the Ninth District economy wends from summer into fall. Consumers are flocking to the malls and appear more willing to travel than earlier in the summer. New homes and other buildings are sprouting up across the region, and manufacturers' orders are swelling. The western portion of the region is getting a lift from a boomlet in oil and gas exploration and from the recent improvement in livestock prices, while in the eastern portion most areas are looking for a good corn and soybean harvest. This vigor in the economy is taxing the ingenuity of employers as they scramble to find workers in the region's tight labor markets, but so far the district has avoided a marked acceleration in wages. Amid the region's current prosperity, however, some soft spots persist. Tourist spending was disappointing in some areas, consumption of the district's iron ore has dropped, and the wheat and other small grain harvest is expected to be disappointing in many areas.
Consumer Spending and Tourism Furthermore, the district started to shrug off some of the sluggish tourist spending plaguing the industry earlier. Since mid-July, inquiries at a Montana tourism office have been "hopping," helping to offset the slow start at Glacier and Yellowstone parks and other Montana tourism venues early in the summer. The Upper Peninsula of Michigan also had a slow start, but in July and August tourist spending was up about 5 percent from a year ago, according to a tourism official. In South Dakota, however, summer tourist spending was slower than expected, with visitations at many of the major attractions down from a year ago. Automobile dealers are less euphoric: "holding their own" and "all right" are terms association executives use to describe recent sales.
Construction and Real Estate Moreover, residential building shows signs of reviving. In July Minneapolis-St. Paul area housing units authorized by building permit were up 2 percent from a year ago; from January through July they are down 17 percent from last year's high levels.
Manufacturing and Business Services The current strength in manufacturing is more than offsetting recently announced layoffs and shutdowns in the region. Noteworthy is the shutdown this summer of a South Dakota pork processing plant employing 850 workers.
Natural resource industries
Agriculture Meanwhile, "the corn is excellent," reports a southern Minnesota banker, reflecting the positive outlook in the corn-soybean areas of eastern South Dakota, southern Minnesota and western Wisconsin, where good yields and favorable prices are expected. But where wheat and other small grains predominate, yields vary greatly, and prices are less favorable than for corn. "We are going to have an average crop," says an ag loan officer in eastern North Dakota. Sugar beet producers expect an average crop.
Labor Markets As employers scramble for workers, reports of higher pay for many specialties, bonuses and nonwage increases in compensation are increasingly common. In South Dakota, which has one of the nation's lowest unemployment rates, hourly earnings in manufacturing are up about 5 percent from a year ago in July compared to 1.5 percent the previous 12 months. No marked general acceleration of wage increases, however, is yet apparent across the region.
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