October 17, 2007
Federal Reserve Districts
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The Ninth District economy grew modestly since the last report. Growth was noted in tourism, services, manufacturing, energy, mining and agriculture. Consumer spending and commercial real estate growth slowed, while commercial construction was steady. Residential construction and real estate continued to weaken. Employment growth was mixed, with tightening conditions in Montana and the Dakotas, but with unemployment rates higher than a year ago in Minnesota and Wisconsin. Overall wage increases were moderate, while prices increased for diesel fuel and decreased for gasoline and lumber.
Consumer Spending and Tourism
End of summer tourism activity increased from last year. Several South Dakota tourism-related businesses reported activity up anywhere from 5 percent to 10 percent, according to an official. Late summer and fall tourism activity was up from last year in northwestern Wisconsin; an official noted that travelers were staying closer to their homes. A representative of a travel company based in Minnesota noted that business travel was up about 5 percent year-to-date through September compared with the previous year.
Construction and Real Estate
Commercial real estate softened. Contacts in Minneapolis-St. Paul indicated new leasing activity appeared to be down for office space and flat for industrial, while retail vacancy continued to be high. Retail vacancy was also a growing concern for contacts in Fargo, N.D., and Sioux Falls, but other segments of the market in those areas were robust. Residential real estate markets experienced continued sluggishness. Pending sales in early September were down 15 percent from the previous year in Minneapolis-St. Paul. Realtors in Michigan's Upper Peninsula reported mostly slower sales, with the exceptions of the Marquette area and the second home market. However, in Fargo, closed sales in September were up about 6 percent from the previous year, and Sioux Falls Realtors were having another record year.
Energy and Mining
Employment, Wages, and Prices
A bank director and an economist noted that many employers in Montana were having difficulty filling low-skill jobs. A staff person in a municipal human resources department described the job market as the tightest in the past 15 years, while a medical claims processing company and an Internet printing service business each plan to add about 100 new employees in Montana. Representatives from a temporary employment agency in the health care sector noted difficulty finding quality workers in Sioux Falls.
In Minnesota, a medical devices company recently announced plans to eliminate several jobs. August seasonally adjusted initial claims for unemployment insurance in Minnesota were 7 percent higher than a year earlier. A temporary staffing agency survey of Minneapolis-St. Paul businesses showed that 44 percent of respondents expected to hire workers during the fourth quarter, while 24 percent expected to reduce staff. In last year's survey, 36 percent expected increased hiring and 11 percent anticipated decreases.
Overall wage increases were moderate. After a 13-day strike, clerical, health care and technical workers at the University of Minnesota agreed to annual raises of 2.25 percent to 2.5 percent for two years.
Price increases were generally modest. However, early October diesel fuel prices in the Midwest increased almost 20 cents since the last report and were 60 cents higher than a year ago. In contrast, Minnesota gasoline prices at the beginning of October were about 30 cents lower than early September and just slightly higher than a year ago. Hardwood and softwood lumber prices decreased since the last report.