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As we enter early spring, the overall Ninth District economy continues to flourish, although natural resource-based industries are still floundering. The forward momentum continues for construction, consumer spending and manufacturing. But low commodity prices persist in depressing farm income and curbing metal mining. Businesses would still like to hire additional workers and are facing some material shortages, which are causing isolated price increases. However, no general acceleration in wage and price increases is noted.
Construction and Real Estate
Construction and real estate remain strong across the region. "Two major projects have construction running way ahead of last year's pace," leads a Montana news article on the region's growing construction sector. Real estate has "never seen a better market," said a Twin Cities realtor association spokesman. "Sales prices are up 8.4 percent from year-earlier levels." Housing permits for the district increased 25 percent in February from year-earlier levels. Public works projects are planned across the region with highway construction remaining robust. In addition, construction contract awards in Minnesota and the Dakotas for February are up 12 percent from a year ago, reports a construction trade magazine. Shortages in dry wall, insulation and shingles are increasing building costs, a bank director reports. In addition, skilled and unskilled workers are still in short supply.
Consumer Spending and Tourism
Like construction, retail spending continues to grow across the district. A Minneapolis electronic equipment retailer reports strong sales in February and March compared to a year earlier. A major Minneapolis-based retailer said its March sales were up 13 percent from 12 months earlier, better than expected for most of its stores. In St. Cloud, Minn., retail employment recently picked up after a couple of years of little change. A mall manager in North Dakota indicates that February and March sales were up over 8 percent from a year earlier. In Montana, an economic development official reports vigorous spending at retail stores. Recent vehicle registrations in the Dakotas also increased moderately from year-earlier levels.
Tourism officials report a moderate to strong finish to the winter season and are optimistic for the summer. Two chambers of commerce in northern Wisconsin report little change for February and March compared to a year earlier. While skiing was up substantially in South Dakota compared to a year ago, snowmobiling was down. Montana reports strong year-to-year gains in skiing and snowmobiling. Looking ahead to the summer, inquiries about summer visits are up substantially for both Montana and South Dakota compared to a year ago.
Manufacturing
Manufacturing in the district still shows signs of expansion, but the weak international economy is curtailing some firms' output. A wood finishing company plans to increase employment 5 percent to 10 percent to meet increased demand for its products. A semiconductor package manufacturer reports strengthening sales over the last three months. A farm implement manufacturer is planning on transferring production from a Canadian plant to a North Dakota plant. A potato processing company intends to open a plant in the Upper Peninsula of Michigan, which could add 40 new jobs. However, "elements of the local manufacturing sector appear to be struggling," reports the St. Cloud Area Business Outlook Survey. The survey reports a decline in the average manufacturing weekly hours worked. In addition, a computer component manufacturer had temporary workforce reductions due to the weak international economy.
Mining and Energy
Metal-based industries remain depressed. In response to low metal prices and environmental legislation, only four major metal mines are operational in Montana compared to six a year ago, says a Montana Bureau of Mines and Geology spokesperson. In addition, due to continued weakened demand for domestic steel, a taconite pellet line at a major Minnesota mine remains closed as the spring shipping season begins.
Meanwhile, natural gas exploration has picked up recently but oil exploration still remains weak. Natural gas exploration is expected to increase this summer to about 200 test wells drilled in Montana, according to a spokesman for a Montana oil and gas organization. Meanwhile oil activity is depressed with only one rig working in North Dakota and only five in Montana compared to 12 and eight, respectively, a year ago.
Agriculture
Along with mining, agriculture is still in the doldrums, but growing conditions are good in parts of the district. Depressed livestock, corn, soybean and wheat prices continue to hurt farmers. Many producers are still storing crops in hopes of future price increases. Milk prices have dropped since January, which has dimmed the once bright spot of agriculture. In addition, over the last year agricultural land prices have decreased slightly in North Dakota and increased slightly in the rest of the district, according to the U.S. Department of Agriculture (USDA).
Favorable growing conditions, however, exist in parts of the district. South Dakota reports upbeat winter wheat conditions with 88 percent of the crop rated good or excellent. In contrast, Minnesota and Montana rated about 50 percent of the winter wheat crop as good or excellent. Moreover, the outlook for planting conditions is good. USDA crop reports indicate that topsoil moisture in South Dakota, North Dakota and Minnesota is nearly 100 percent adequate or in surplus.
Employment, Wages and Prices
Businesses still report difficulty finding and retaining workers. Some hospitals, for example, are having trouble filling nurse positions. Unemployment rates across the district are very low, including Minnesota's record low rate of 2.2 percent, seasonally adjusted, in March. Despite numerous job openings in Minnesota and the Dakotas, payroll employment growth has slowed, due to a lack of qualified applicants. Because of the unavailability of qualified labor, an aluminum parts manufacturer is planning to expand outside of the region.
Despite tight labor markets, no significant acceleration in wages is reported. A Bank director says that wages are the top issue in contract negotiations, with increases reported at about 3 percent to 4 percent. Several companies with expansion plans aren't prepared to offer high wages. In contrast, some other businesses are boosting wages to attract employees. A bank director reports that a drill manufacturer is starting high school graduates at $8 an hour.
Prices remain stable overall, with increases in selected markets. A survey of Upper Midwest businesses and manufacturers indicates that only 20 percent of respondents were facing increases in input prices. Bank directors note price increases in dry wall and pharmaceuticals.
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