Federal Reserve Bank of Minneapolis
Summary of Economic Activity
Economic activity in the Ninth District was flat to slightly down since the previous report. Employment grew slightly, but labor demand continued to soften. Price pressures increased modestly, and wage growth was moderate. Consumer spending was mixed. Construction improved slightly, while real estate markets were mostly flat. Manufacturing slowed and agricultural conditions weakened as farm income fell. Activity among minority- and women-owned business enterprises was soft.
Labor Markets
Employment grew slightly since the last report. Labor demand remained positive but continued to soften. The share of firms with unfilled labor needs fell in May and June compared with earlier in the year. Expectations for future hiring were also soft. Tourism and hospitality firms in Minnesota noted lower seasonal labor demand for this time of year, especially for full-time workers. Staffing contacts reported declines in job orders. Labor availability continued to improve. Workforce contacts said that job fairs and job centers were seeing increased traffic. A Wisconsin source said there were "still plenty of job openings," but employers were raising hiring standards and pausing on some hires. A Montana staffing contact said more job candidates were applying but employers were being picky with hiring because "have been burned time and time again since COVID so they are very cautious and hesitant when hiring."
Wage growth was moderate. Survey respondents reported wage increases consistent with levels seen earlier in the year. A Montana staffing firm noted that wage growth was "still higher than pre-pandemic levels, but I'm not hearing about regular increases that would match the previous breakneck pace."
Prices
Overall prices increased modestly, an easing in the pace of increase since the last report. More than half of firms responding to a monthly survey reported no change to sales prices in June from a month earlier, while fewer than a third increased their prices. Input price pressures remained greater than consumer price pressures on balance, and expectations for both input and final prices in the month ahead were more moderate, as more than 60 percent expected no change in either. Contacts continued to report difficulty passing input cost increases through to customers. Retail fuel prices in District states were roughly unchanged since the last report. Prices received by farmers increased in May from a year earlier for dry edible beans, lentils, eggs, milk, hogs, and cattle; prices decreased for corn, soybeans, wheat, hay, canola, chickpeas, potatoes, chickens, and turkeys.
Worker Experience
Employed workers who responded to a recent survey were mostly satisfied with the schedule flexibility and work-life balance they were offered. On the flipside, they were least satisfied with available career advancement opportunities. About half of them were looking for different jobs but would hesitate to apply for or accept a job if pay was low or schedules were difficult. Access to training or education as well as affordable housing were listed as the top things that would help these workers reach their objectives. A hospitality worker in Deadwood, South Dakota, said that housing in the area had become unaffordable. "I had to move 45 minutes away, and even though we get paid well, we are being priced out," they said.
Consumer Spending
Consumer spending was flat overall since the last report, with some variability. Tourism contacts reported some slowing, but activity remained healthy for some. A Montana camping contact noted that bookings had softened somewhat from last summer, "but operating at 90 or 95 percent capacity is still pretty darn good." A contact in Michigan's Upper Peninsula said that "inflation seems to have curbed some travel and talk of ‘staycations' is returning." Floods in southern Minnesota impacted tourism and other activities and caused some businesses to temporarily close. South Dakota retailers expected summer sales to be flat "at best," said a contact there, adding that "consumers continue to trade down in a variety of areas, looking to spend less." Hotel occupancy and average room rates saw healthy year-over-year increases in Minnesota and the Dakotas, but they were flat or declining in Montana and Wisconsin. Regional airports reported strong early summer traffic.
Construction and Real Estate
Construction improved slightly since the last report. Industry data showed that new projects and overall activity increased compared with last year. However, contacts were more mixed in their assessment. A Montana source said that contractors were busy, but projects were seeing more bids and smaller markups. A Minnesota contact in commercial glass said the company was "feeling the softening of the nonresidential construction market." Single-family permitting was down in many markets with the exception of Minneapolis-St. Paul, where permits rose more than 20 percent in May and June compared with last year. A manufactured housing firm said they were having a good year, but "our performance is an exception. Most that we talk to are down."
Commercial real estate was flat to down slightly. Industrial space remained healthy but vacancy ticked slightly higher. Office property owners in Minneapolis-St. Paul continued to face "a glut of space" and refinancing challenges, according to an industry source. Retail and multifamily property owners have benefited from the lack of new construction, keeping a lid on vacancies; a contact said midlevel apartments "are faring better because of the value proposition." Residential real estate was mixed, with recent home sales generally rising compared with last year in the eastern part of the District but slowing across much of the western portion.
Manufacturing
District manufacturing activity decreased briskly since the last report. A regional index of manufacturing conditions indicated decreased activity in June from the previous month in Minnesota, North Dakota, and South Dakota. Manufacturing sector respondents to a monthly survey reported that orders were down on balance in June from a month earlier. The outlook for the month ahead was similar. A custom manufacturer in North Dakota reported that "all of our customer demand seems to be dropping off," while a Wisconsin metal fabricator commented, "in 43 years I have never seen it this slow."
Agriculture Energy and Natural Resources
District agricultural conditions weakened since the last report. Lenders responding to an agricultural credit conditions survey overwhelmingly reported decreased farm incomes in the second quarter of 2024 relative to a year earlier, with expectations for further declines in the coming three months. Poultry producers were concerned about an avian influenza outbreak in the region. While ample precipitation was welcomed in some areas previously affected by drought, other areas were experiencing catastrophic flooding or delayed planting due to excess moisture. District oil and gas exploration activity was unchanged since the previous report.
Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business enterprises (MWBE) was lower on balance. Contacts reported that consumers were being more careful with their expenses. Both headcount and hiring demand were mostly unchanged among contacts. More contacts raised wages in recent weeks compared with those who did not. Some continued to resort to higher pay to attract needed talent. Expectations for future sales were slightly more upbeat, but hiring and headcount were expected to stay flat over the following weeks.
For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.