June 9, 2010
Federal Reserve Districts
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The Ninth District economy grew at a steady pace since the last report. Consumer spending, tourism, residential real estate and construction, services, manufacturing, energy, mining and agriculture saw increases. Commercial real estate was flat at low levels, and commercial construction activity was slow. Some signs of strengthening were noted in labor markets. Wage increases were subdued, and overall prices remained level.
Consumer Spending and Tourism
Automotive dealers in the Minneapolis-St. Paul area reported that car sales and maintenance and repair business were up from a year earlier. April new car sales were up significantly higher from March in Montana and the Upper Peninsula of Michigan, but were down slightly in western Wisconsin.
Tourism contacts are optimistic for the summer season. An official in the Upper Peninsula reported that tourism traffic was starting to look pretty good and a strong summer season is expected. The number of nonresident visitors to Montana is expected to increase 2 percent compared with a year ago after a flat year in 2009, according to state tourism officials. Inquiries about summer tourism activities were strong in Duluth, Minn. However, recent leisure bookings by a Minnesota travel agency were down during April and May, and advanced bookings for the summer season were slow.
Construction and Real Estate
Commercial real estate was slow. The amount of unused space in the retail market in Minneapolis increased by 135,000 square feet during the first quarter. An industry contact in northern Wisconsin noted that nearly every sector in his area was overbuilt. Residential real estate saw continued slow growth. April home prices increased in Minneapolis-St. Paul for the fourth consecutive month, the longest period of increasing prices since 2004. Brokers in Fargo, N.D., and Duluth, Minn., noted increased activity in April as home buyers took advantage of the federal tax credit before its expiration. Contacts around the District reported increased housing short sales for distressed properties.
Energy and Mining
Employment, Wages and Prices
Despite signs of improvement, overall labor markets remained weak. In Montana, a recent job fair attracted hundreds of job seekers for openings at almost 50 companies. A wood furniture factory and chain of stores in Montana recently went out of business, affecting over 60 workers statewide. Almost 50 workers were laid off by a defense contractor in Minnesota.
Wage increases were subdued. According to respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey, only 18 percent expect to increase employee compensation at their companies over the next six months. In last year's survey, 21 percent expected to increase compensation. Several temporary staffing firms noted flat to lower wages. The majority of respondents from the Minneapolis Fed's preliminary survey of professional business services firms indicated no increases in wages for the next year. A nurses union in Minneapolis-St. Paul recently approved a one-day strike in response to negotiations with area hospitals, which had proposed to change work rules, cut pensions, and reduce health benefits.
Overall prices remained level. Some price pressures were noted in materials for large construction projects; however, in recent weeks, prices for oil, copper, and some steel products decreased. In addition, fertilizer prices were down from a year ago.