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Federal Reserve Districts

Ninth District--Minneapolis

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The Ninth District economy grew modestly since the last report. Consumer spending, tourism, residential construction, services, manufacturing, energy, mining and agriculture saw increases. Activity in the commercial and residential real estate sectors decreased, while commercial construction remained weak. Labor markets strengthened slightly since the last report. Wage increases were moderate, and prices increased modestly.

Consumer Spending and Tourism
Retail spending increased moderately. A major Minneapolis-based retailer reported that same-store sales in July were up 2 percent compared with a year earlier, and a Minnesota-based restaurant chain reported that recent sales increased moderately compared with a year ago. July sales at two Minneapolis area malls were above year-ago levels, and mall traffic seemed to hold steady during August. A retailer in Montana noted that sales for appliances and electronics were up about 10 percent compared with a year ago. In southwestern Montana, a furniture store reported that recent sales increased; however, sales at a lumber and home improvement retailer were down. A chamber of commerce representative in northwestern Wisconsin noted that while retail sales had been tracking downward compared with a year ago, there was a recent pickup due to solid tourism activity.

Vehicle sales were up slightly in North Dakota, according to a representative of an auto dealers association. The owner of a Minnesota domestic auto dealer said that August sales were up from a year ago, but corporate customers were more cautious about purchases.

Summer tourism activity was solid. Resorts in north-central Minnesota reported that lodging revenue was up about 10 percent on average compared with a year ago; restaurants also saw strong increases. Tourism activity was above year-earlier levels in North Dakota, according to an official. In western South Dakota, the number of visits and sales at attractions were on par with last year's strong summer season. Visits to Yellowstone and Glacier national parks were higher than a year ago, but on average tourists were spending less.

Construction and Real Estate
Commercial construction was slow. Few large projects were under way in the Minneapolis-St. Paul area. Commercial permits in Montana were at about half of their year-ago levels for both June and year-to-date. Commercial building in Fargo, N.D., has recently slowed despite a relatively low unemployment rate in the area. Residential construction continued its mild recovery. The number and value of August residential permits in Minneapolis-St. Paul increased from both July and June levels. The value of residential permits in Sioux Falls, S.D., was roughly flat in July from a year earlier.

Activity in commercial real estate markets was down. A commercial brokerage in Minneapolis said that while unused space continued to increase, the rate of increase seemed to have slowed recently. Vacancy rates there were at record highs; the retail sector was particularly hard hit. A bank director in Billings, Mont., said market activity there was down substantially and was expected to continue to drop. Recent residential real estate activity decreased from a year earlier. July closed sales in Minneapolis-St. Paul were down 40 percent from a year earlier; however, median sales prices were up more than 2 percent.

Activity in the professional business services sector increased since the last report. Contacts from the legal sector reported that billings during July were up from a year ago, especially for firms that deal with bankruptcies. A call center is expanding in South Dakota. Appraisers and other professional services firms that support home refinancing reported strong activity over the past month.

Manufacturing output was up since the last report. A July survey of purchasing managers by Creighton University (Omaha, Neb.) showed strong increases in manufacturing activity in Minnesota and South Dakota, and slight increases in North Dakota. A drainage pipe maker is opening a plant in South Dakota. In Minnesota, two new solar energy component manufacturing facilities are planned. In the Upper Peninsula of Michigan, a coated paper company noted an increase in orders over the past two months from earlier this year and last year.

Energy and Mining
Activity in the energy and mining sectors increased since the last report. Late-August oil exploration increased from mid-July. New wind energy projects are planned in the Dakotas. Most District mines were operating at near capacity. Iron ore production in Minnesota increased in July compared with June. Meanwhile, in the Upper Peninsula, a new copper mine was under construction. A new coal mine was under consideration in Montana. Exploration for a potash mine was under way in North Dakota.

Agricultural activity increased. Crop conditions improved across most of the District. The price of wheat surged since the last report. Sugar beet producers expected an early harvest with large yields, but were concerned about a judge's ruling to halt the use of GMO seeds until the conclusion of an environmental impact study. Meanwhile, the Minneapolis Fed's second-quarter (July) survey of agricultural credit conditions indicated that lenders expect overall agricultural income and capital spending to decrease in the third quarter.

Employment, Wages, and Prices
Labor markets strengthened slightly since the last report. After 25 straight months of year-over-year employment decreases in Minnesota and Wisconsin, both states recently posted modest year-over-year employment increases. Initial claims for unemployment insurance in Minnesota were down 24 percent in July compared with July 2009, but were still higher than July 2008 levels. A temporary staffing firm in Minnesota noted that demand for industrial workers was even in July, but has picked up somewhat in August.

Despite recent strengthening, overall labor market conditions remained weak. In Minnesota, a hospital recently announced plans to eliminate up to 250 full-time positions by year-end. Two Minnesota state universities announced layoffs of almost 40 tenure-track faculty in anticipation of future funding cuts. There were plenty of qualified applicants available to fill open positions in Montana. In addition, fewer foreign workers were needed to fill seasonal jobs in Montana this past summer compared with a year ago.

Wage increases were moderate. Average wages for manufacturing employees in District states for the three-month period ended in July 2010 were only 1 percent higher than the same period a year ago. A nurses union in Duluth, Minn., called for a one-day strike; staffing levels were the primary issue. In Montana, a bank director noted that a number of employers were uncertain about their obligations under the new health care system and therefore were hesitant to make long-term commitments regarding benefits.

Overall prices increased modestly. Minnesota gasoline prices decreased slightly from mid-July through the end of August. Fertilizer prices were lower than a year ago. Meanwhile, prices for copper and lead increased from mid-July through the end of August.

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Last update: September 8, 2010