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Ninth District - Minneapolis

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The overall Ninth District economy remains highly charged, although agriculture's batteries are running low. Construction, consumer spending and manufacturing are energizing the economy. Moreover, the mining and energy industries are recently showing signs of recharging. However, low prices are reducing the power of this fall's bountiful harvest. Meanwhile the tight labor markets are generating wage pressure as several businesses report boosting worker pay. Overall prices remain level but the cost of some items is accelerating.

Construction and Real Estate
"Construction is still going strong," said a North Dakota builder, which describes the current state of construction throughout the district. A Wisconsin bridge-girder manufacturer will expand operations by over 10 percent due to increases in federal funding for bridges over the next five years. A $20 million amphitheater project is planned for a Minneapolis suburb. In Minnesota and the Dakotas, construction contracts awarded rose 3 percent in the three months ending in August from a year earlier. District housing units authorized grew by 3 percent in the three months ending in August from a year earlier.

Consumer Spending and Tourism
Consumer spending is robust. Sales are up 7 to 10 percent compared to a year-earlier at a large Minneapolis area mall, and up 10 percent at a regional mall in Fargo, N.D. Several large retailers are expecting holiday sales to increase 10 to 15 percent over 1998 levels. Auto sales are level with last year in North Dakota. The consumer market for educational games is "very, very strong," reported an advisory council member. However, retail sales are weak in agricultural areas of northeast Montana, according to a bank director.

Fall tourism is steady across most of the region. Northern Wisconsin is on par with a year earlier following a strong close to the summer season. A chamber of commerce representative in northwest Minnesota reports increases in tourism traffic compared to a year earlier. Hotel occupancy and visits to attractions are flat to down slightly in South Dakota compared to year-earlier levels, but tourists are spending more than last year, according to a tourism official. Montana tourism is steady overall, but summer tourism finished down in Glacier National Park and other northern destinations compared to a year earlier.

Manufacturing in the Ninth District remains robust, with many manufacturers reporting strong sales and expansion plans. A Minnesota home improvement product manufacturer plans to add new equipment and staff to meet rising demand for its products. A Wisconsin plastic products manufacturer reports an increase in both sales and development and is considering building another plant. A North Dakota equipment manufacturer reports year-to-date sales up 5 percent as compared to last year. A Wisconsin industrial products manufacturer is expanding production capacity due to increases in product sales. In addition, an October St. Cloud State University (Minnesota) survey reveals an increase from the previous survey of hours worked at area manufacturing establishments.

Mining and Energy
The metal-based mining industries are starting to rebound as evidenced by increases in iron ore production. Increases in steel plant utilization and reductions in iron ore inventories have spurred some iron ore mines to reopen. A Minnesota iron ore mine production line reopened in September and two Michigan iron ore mines reopened in October. Most mine workers have agreed to a five-year contract, which should reduce the risk of work stoppages.

Meanwhile, oil exploration activity has picked up. In October, 10 rigs were operating in North Dakota, three rigs in South Dakota and four rigs in Montana as compared to four, zero and four, respectively, in July. In addition, August oil production in the district was up 2 percent from June production levels.

Current crop production forecasts for the district suggest a bountiful harvest. Expected soybean, hay and sugarbeet production for Minnesota, the Dakotas and Montana in 1999 is above the hefty 1998 harvest levels. However, expected 1999 corn production in Minnesota and the Dakotas is 10 percent below the record 1998 harvest amounts, and 1999 small grain production in North Dakota is significantly below 1998 levels. Farm income, however, remains depressed as dismal agricultural prices are offsetting the bumper crop.

Employment, Wages and Prices
"There is more stress on finding help than customers," reported a mall manager in North Dakota, a theme heard across the district. A South Dakota state labor official said that employers are "looking for good prospects, and they're hard to find. I don't see anything changing that." Economic development officials in Fargo, N.D., reported that businesses may soon pool resources to offer scholarships or pay off school loans to attract employees. Even though significant layoffs are reported in La Crosse, Wis., employers in the region still cite difficulty in finding labor. A St. Cloud State University survey reveals that 55 percent of survey respondents indicate that it was more difficult to attract qualified workers in September than it was three months earlier.

Wages and salaries are increasing in response to tight labor markets. Some employers in the district are offering starting bonuses for entry-level retail positions. A medical center in La Crosse, Wis., reports a 4 percent hike in wages. Union workers at food plants in southern Minnesota negotiated over a 2 percent raise each year for four years, and a 12 percent increase in starting pay. Montana directors reported wage pressure for middle-management and retail positions, and local unions are bargaining for higher wages. Several Montana industries, however, report steady wages.

Some product prices are increasing; however, the upward pressure on wages isn't spilling over to most prices. An informal survey of manufacturers in Minnesota and Wisconsin indicates that input and product prices are largely holding steady. High productivity and low prices on products coming from abroad are restraining overall price increases. Exceptions include climbing construction-input costs, health insurance costs, milk prices and gas. Health insurance costs are expected to increase 12 percent next year reported an advisory council member. Corrugated paper prices are expected to increase 10 percent next year, reported another advisory council member. Costs for residential heating oil and natural gas are expected to increase this winter.

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Last update: November 3, 1999