Federal Reserve Bank of Minneapolis
Summary of Economic Activity
Economic activity in the Ninth District was slightly down since the previous report. Employment increased slightly, but labor demand continued to trend down. Prices increased slightly, and wage growth was moderate. Manufacturing declined moderately and construction decreased slightly. Consumer spending, energy, and agriculture were flat. Residential real estate activity was moderately lower, and commercial real estate was slightly up. Activity among minority- and women-owned business enterprises was mixed.
Labor Markets
Employment increased slightly since the last report. Those with open positions reported that labor availability was much improved. A source at a Minnesota supply company said that it received 12 applications for a high-skill driving position that it had previously struggled to fill, and noted, “I about fell out of my chair.” However, job openings continued to decline, particularly among full-time positions, and a larger share of firms were not hiring. A job fair in central Minnesota was canceled for lack of employer interest. Hiring related to turnover remained high. A Montana staffing company said that they were receiving record numbers of job applications “and not many are unemployed.” Numerous contacts acknowledged some hiring caution due to the uncertainty of the upcoming presidential election, and also some optimism for higher labor demand afterward.
Wage growth was moderate. Survey respondents reported increases similar to levels seen earlier in the year. Numerous contacts in different fields reported that wages increased by three to four percent. Workforce contacts reported that some businesses looked to less-experienced workers in hopes of keeping labor costs down. A South Dakota contact said that labor demand has dropped, “not because businesses don’t need the help, but because they don’t believe they can afford the wages, so they’re not hiring.”
Prices
Prices increased slightly overall since the previous report. A monthly survey found little change overall in prices charged by firms in September compared with the previous month. Input price pressures appeared to have ticked up slightly, as 40 percent of firms said they were up over the month. Results from an annual tourism and hospitality survey indicated that firms in the sector saw decreased inflationary pressure over the summer relative to the year earlier. Retail fuel prices in District states decreased slightly since the previous report. Prices received by farmers increased in August from a year earlier for sugar beets, dry edible beans, chickens, eggs, milk, and cattle; prices decreased from a year earlier for corn, soybeans, wheat, barley, lentils, hogs, and turkeys.
Worker Experience
Overall, workers and job seekers across the region experienced a moderate decrease in their ability to find jobs that meet their demands, but there was considerable variation across employment types. A workforce development contact in Minnesota reported that getting jobs in tech and IT was difficult, in part because remote work allows employers to hire experienced workers from out of state. Project delays in construction limited electricians’ abilities to secure employment, according to a labor contact. On the flipside, job seekers continued to experience relative ease finding jobs in the health care sector, particularly those in older adult services and long-term care, where wages and bonuses remained attractive. Flexibility continues to be a key priority among workers and job seekers. “Employees, especially younger generations, are seeking roles where they feel they can make meaningful contributions,” shared a Minnesota contact. “Many jobseekers are now more selective, seeking out employers that align with their values, offer clear career development paths, and support mental health initiatives.”
Consumer Spending
Consumer spending was flat since the last report. A South Dakota contact said retail foot traffic has been down and consumer spending has been flat. However, a Minnesota mall contact reported healthy recent foot traffic and spending activity, with similar expectations heading into the holiday season. Vehicle sales, including for recreation, were softer on a year-over-year basis. Hotel sources suggested that occupancy rates were steady and average room rates remained comparatively high. Leisure travel across District airports remained strong. Contacts reported some concern for consumer financial health. Bankers noted increases in home equity loans as well as increased consumer loan delinquencies. A retail contact said consumer health was “deteriorating, but not tanking. Lots of trading down” in purchases, like generic products for namebrand ones.
Construction and Real Estate
Construction activity was down since the last report, with some lumpiness across the sector. Industry data suggested that sector activity was growing slightly. But sources suggested that large projects, like data centers and infrastructure, have balanced much slower activity in other segments, particularly multifamily and other commercial projects. A contact from a mid-sized Minnesota construction firm said it was seeing “increased pressure on margins to secure a smaller number of opportunities.” Several contacts reported a small, preliminary uptick in those looking to restart delayed projects given the recent cut in interest rates. Others reported that potential customers and projects were in a “wait and see” mode in relation to the election. Single-family residential permitting increased in September, year over year, in much of the District, with the exception of Minneapolis-St. Paul, which saw a fairly large decline.
Commercial real estate remained soft. Industrial vacancy rates have risen but were expected to fall going forward thanks to a dearth of new building. Office vacancy rates remained high, though new leasing activity in high-quality space was reportedly healthier. Residential housing sales were lower overall and fairly volatile compared with last year’s activity. Available sales figures for August and September showed double-digit declines in some markets, while some markets saw increases of similar size, even in the same state.
Manufacturing
Manufacturing activity in the District decreased moderately since the previous report. More manufacturing firms reported decreased orders in the previous month compared with those seeing increases; however, most expected sales to increase in the coming month. A regional manufacturing index indicated a contraction in activity in Minnesota and South Dakota in September from a month earlier, while activity increased in North Dakota.
Agriculture, Energy, and Natural Resources
Agricultural conditions in the District were stable at low levels. Preliminary estimates suggested that corn production in District states will decrease modestly from a year ago and soybean production will increase moderately. Wheat production in District states increased significantly from last year. A decline in Montana was more than offset by increases in other states. District oil and gas exploration activity was unchanged since the previous report.
Minority- and Women-Owned Business Enterprises
Minority- and women-owned business enterprises were evenly split between those reporting higher or lower sales; a small number noted flat conditions. Over half of contacts reported lower profits in the last month. Employee headcount was largely unchanged, and only one in five contacts said hiring demand for their business was up. Most contacts expected sales to remain steady or improve over the following weeks. A South Dakota restaurant owner said they were hoping for an “exceptional hunting season” to boost their business and improve profitability. Less than half of contacts reported paying more for labor and other inputs compared with the previous month. A similar share said they expected costs to increase further in the coming weeks.
For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.