Federal Reserve Bank of Minneapolis

Summary of Economic Activity

The Ninth District economy contracted slightly since the previous report. Respondents to a December survey of business conditions reported declining demand and profits from the previous month. Employment grew modestly, but job openings were flat or lower for most contacts. Wage pressures continued to moderate, while price increases were mild. Consumer spending increased and holiday sales traffic was generally strong, while commercial real estate activity, agricultural conditions, and energy were flat. Construction and manufacturing activity fell, and residential real estate remained subdued. Minority- and women-owned businesses reported decreased activity.

Labor Markets

Employment grew modestly since the last report. Overall hiring was still positive, but job openings were either flat or lower for most contacts. In Montana, the number of brand-new job postings fell notably in December compared with the previous month and year. District staffing contacts also reported that December job openings were generally flat or lower. Bank surveys showed that recent hiring demand slowed but future demand was expected to rise. Indexes of hiring sentiment in Minnesota and the Dakotas were mostly stable; one was modestly expansionary, and the other slightly contractionary. Contacts widely reported that labor supply had improved somewhat; more firms reported being closer to fully staffed and being more selective in hiring. A Montana staffing contact added, "We are seeing more clients settling in with who they have and not hiring unless the candidate is perfect." A Wisconsin staffing contact said that businesses were "getting more selective on who they hire... [and] contacting us to do confidential recruiting to replace underperforming employees."

Wage pressures continued to moderate, nearing pre-pandemic conditions. Staffing contacts in Montana, North Dakota, and Wisconsin said wage pressures were flattening and one-time wage enhancements were falling. A mid-sized Minnesota health care provider gave a wage increase of three percent, its lowest since before the pandemic: "Wage growth is finally slowing."


Price increases were mild since the last report. A substantial majority of firms responding to a monthly survey indicated no change to the prices they charged to customers in December from a month earlier, though most of the remainder indicated that they increased prices. Input price pressures were slightly greater, but most respondents also reported no change over the month. A regional manufacturing index indicated modest input price increases in December. Retail fuel prices in District states fell to their lowest levels in more than two years. Home heating costs were expected to be significantly lower this winter than last.

Worker Experience

Unemployed workers in Montana shared they were mainly focused on pay, benefits, and upward mobility as they searched for jobs. The difficulties they faced gaining employment were mostly due to skills gaps, but they also cited other factors, such as low pay and child care affordability. Employed workers who were looking for different jobs also faced a range of challenges. A single mother working in the nonprofit sector who has been trying to switch jobs for almost a year said that balancing her children's schedules, her own job, and household chores left her with little time to search and apply. A labor contact in the Upper Peninsula of Michigan shared that the exodus of public sector workers to the private sector had slowed. They said that high food prices in the area, particularly for meat, continued to stretch workers' budgets. "I am hearing our union members talk more about starting to raise chickens and ducks... I am seeing more self-serve egg stands along the road," they added.

Consumer Spending

Consumer spending rose moderately since the last report. Contacts reported that traffic and spending during the holidays was generally higher. A retail industry contact in Minnesota said this year's holiday season exceeded expectations for many and "felt very much like a pre-pandemic holiday season." A Minnesota mall contact said December traffic was about 15 percent higher than last year, with some days exceeding pre-pandemic levels. Sales at movie theatres, restaurants, and other food retailers were reportedly strong. A South Dakota retail contact noted that traffic was down in many places there, but overall spending was flat or slightly higher. Unseasonably warm weather helped get shoppers out to many stores, but sales of winter gear and equipment were negatively affected. Montana's lodging sector continued to see strong activity, but occupancy and revenue at Minnesota hotels were down slightly. New car and truck sales were higher in December at a District dealer with multiple locations.

Construction and Real Estate

Construction activity was lower overall since the last report. Among roughly two dozen construction contacts, recent sales were lower and profits have been particularly hard hit. Recent hiring demand has fallen somewhat, but sentiment was modestly more positive for the early part of 2024. Among sectors, firms in infrastructure continued to fare better thanks to federal spending. November and December commercial permitting was generally flat or lower in the District's larger markets compared with a year earlier. Residential building was constrained in many markets, but single-family permitting in Minneapolis-St. Paul saw sustained increases for several months, including December.

Commercial real estate was flat overall. Vacancy rates for industrial space have ticked higher thanks to significant speculative building in the last year. Office markets remained soft, and reports of tenant concessions were rising. Retail vacancy has improved modestly thanks to stronger foot-traffic trends and lower levels of new construction. Residential real estate remained subdued, with year-over-year sales continuing to decline in November and December.


District manufacturing activity decreased moderately since the last report. Preliminary results from a manufacturing survey found a substantial decrease in orders, production, and profits in 2023 from the prior year, though capital investment increased. Expectations for 2024 were mildly optimistic. Manufacturing sector respondents to a monthly survey reported sharply decreased sales in December from a month earlier. In contrast, a regional manufacturing index increased to levels indicating an expansion in activity in Minnesota, North Dakota, and South Dakota in December from a month earlier, though new orders decreased.

Agriculture, Energy, and Natural Resources

District agricultural conditions were unchanged since the last report. Contacts across the region gave differing reports about farm incomes. Contacts generally agreed incomes were down substantially from a year ago, though some indicated they were stronger than expected. District oil and gas drilling activity was stable since the previous report, and industry contacts reported that production increased modestly. District iron ore mines continued to operate at capacity.

Minority- and Women-Owned Business Enterprises

Activity among minority- and women-owned business enterprises (MWBE) was lower on balance. Most businesses reported lower sales activity in the recent four-week period. A Minnesota retailer believed that diminished discretionary income among consumers was the main reason behind lower sales. Labor and nonlabor costs as well as final selling prices were slightly higher on balance. Some expected price pressures to extend into next month. "It is extremely hard to keep up with wage and benefit pressures and competition for good, qualified and experienced therapists in this market," commented a health care contact. Profits continued to edge lower among half of MWBEs; a slightly lower share expected profits to remain low over the following weeks.

For more information about District economic conditions visit: https://www.minneapolisfed.org/region-and-community.

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Last Update: January 17, 2024