6 posts from April 2014

Planting intentions: What’s cropping up this year?

One of the major stories in agriculture over the past year was a big reduction in crop prices from the records they hit in 2012 toward more historically normal levels. In particular, corn prices dropped from over $7 per bushel in late 2012 to just over $4 more recently. Wheat and soybean prices fell over that period, too, but not as dramatically.

As expected, farmers reacted to these market conditions by moving away from corn and toward other crops, especially in the Ninth District. Nationwide, farmers intend to plant 4 percent fewer acres of corn in 2014 compared to last year, according to the U.S. Department of Agriculture. Meanwhile, soybean acreage is projected to increase 6 percent to an all-time record, while the forecast for wheat is nearly flat, with a 1 percent decrease in planted acres.

Farmers in the district are taking a harder turn away from corn, whose acreage is projected to decrease by 6 percent, while both soybean and wheat plantings are expected to increase by 12 percent and 11 percent, respectively (see chart below).

Plantings -- 4-29-14

Most of the decline in corn is accounted for by a big drop in North Dakota—23 percent—and a 6 percent drop in South Dakota; Minnesota and Wisconsin acreage is unchanged from last year. Likewise, while soybean acres are going up in all states, they’re surging 22 percent in North Dakota. Wheat acreage is also way up in North Dakota, at 28 percent, including a 38 percent jump in durum wheat, a specialty variety used for making pasta. Minnesota and Montana are increasing wheat acreage slightly, while South Dakota and Wisconsin both expect 8 percent decreases.

The USDA’s survey also covers some other important niche crops in the district. After a tough year for sugarbeets, acreage will be down 4 percent in North Dakota and 6 percent in Minnesota. Dry bean acreage will increase 36 percent in Minnesota and jump a whopping 41 percent in North Dakota, the nation’s leading producer (though acreage will remain below the 2012 level). And the nutrition conscious who closely watch their intake of omega-3s can also rejoice—North Dakota flaxseed acreage will double from last year.

New businesses: The young and the (hopefully) established

Research has shown that young firms are an important source of economic activity and innovation. While their numbers took a beating during the recession, there are signs of life in Minnesota for new establishments. Unfortunately, employment at these businesses has not yet rebounded.

The Bureau of Labor Statistics tracks the annual number of establishments by age, as well as employment at these businesses. In Minnesota, total establishments less than one year old tended to run around 10,000 annually—give or take—until the recession, when they plunged to a low of 7,300 in 2009 (see chart). They have rebounded modestly in recent years, including 9,500 in 2012.

Survival rates of these young establishments have also faltered, though this trend got started before the recession. From 1994 to 2003, new establishments had an average five-year survival rate of almost 56 percent. Survival rates for the 2004 cohort group—those still around in 2009—fell below 50 percent and got as low as 44 percent before rebounding to 49 percent for the most recent 2008 cohort group.

But one important measure has yet to recover: jobs. Since 2001, employment at these young businesses has fallen steadily, getting cut in half to 40,000 as recently as 2011—with most of the loss coming during and subsequent to the recession (see chart). While there has been a small bounce over the last two years, young establishment employment is still well below prerecession levels.

  Establishments -- 4-25-14

Cold, snowy winter slowed, but didn't stop, the Ninth District economy

While exceptionally cold and snowy weather had a chilling effect on some consumer and business activity during the winter months, the Ninth District economy continued to show signs of moderate growth.

February nonfarm employment in district states increased at a moderate 1.4 percent pace from a year earlier, while the district unemployment rate dropped to 5.1 percent from 5.8 percent last year. Employment growth was strongest in North Dakota, while growth slowed in most other areas of the district. Meanwhile, the unemployment rate increased slightly in Minnesota, while staying flat or edging downward in other district states.

Wages for manufacturing workers in the district and nation slowed to 1.5 percent during the three-month period ending in February compared with a year earlier. A year ago, district manufacturing wages increased 2.8 percent. In North Dakota, manufacturing wages increased less than 1 percent, the slowest growth since 2007. Manufacturing wages decreased in Montana and South Dakota.

Personal income growth (adjusted for inflation) was positive overall, but slowed during fourth quarter 2013 across district states. While North Dakota’s year-over-year personal income growth of 3.1 percent was the highest in the district, it was the slowest pace of growth in that state since 2009. Personal income dropped 1.3 percent in South Dakota, the only state to post a decrease, due to a steep decline in farm income.

New housing authorizations for the three-month period ending in February were down 8 percent in district states. This follows strong gains in housing units authorized over the past two years. Nationally, housing units authorized were up 8 percent over the same period. The Dakotas and Minnesota posted year-over-year declines during the past few months, while Wisconsin was the only district state to show an increase. Home prices continued to show increases compared with a year earlier in several district cities. During fourth quarter 2013, home prices were 14 percent higher than a year ago in Bismarck, N.D., 12 percent higher in Minneapolis-St. Paul, 7 percent higher in Fargo, N.D., and 4 percent higher in Sioux Falls, S.D.

For current and historical data on the economic indicators referenced here, see the “Monthly Summary” spreadsheet, along with other Ninth District data that are updated regularly.

Higher ed endowments rebound in 2013 in district states

Higher education budget officials got a bit of good news this year as endowments at many universities posted strong gains in assets in 2013, according to an annual report from the National Association of College and University Business Officers (NACUBO) and Commonfund Institute.

Nationwide, assets in 835 endowments tracked by the report grew by 12 percent to almost $450 billion. Assets declined slightly in 2012.

There are 40 higher education endowments of at least $20 million in Ninth District states. In 2013, their combined assets grew by 14 percent to $10 billion. Sixty percent of these endowments benefit private institutions, but they hold of minority (40 percent) of assets. The two biggest, by a considerable margin, support the University of Minnesota ($2.8 billion) and the University of Wisconsin ($2 billion). Both had strong results in 2013, but Minnesota’s assets leapt by more than 21 percent (see Chart 1).

Endowments typically grow by both investment returns and donations, though the NACUBO report does not detail these different asset streams. Growing endowments mean more resources for universities because IRS regulations require that foundations disburse at least 5 percent of assets annually—a minimum of $500 million this year alone from endowments in Ninth District states. This disbursement rule is also one reason some endowments have struggled to return to prerecession levels.

The strong asset increase last year at the University of Minnesota (which, technically, is two separate endowments) belies a long road to asset recovery, as asset levels are still slightly below their peak 2007 levels (see Chart 2).

Most other endowments have been doing better. Among 24 other foundations (with available figures from 2007), assets grew 15 percent over this period. Three endowments saw zero or negative growth, but 10 had asset growth of 20 percent or more since 2007, including those benefiting the University of Wisconsin and the College of St. Scholastica, a small private college in Duluth, Minn., which saw its endowment nearly double over this period to $54 million.

Endowments -- 4-9-14

Have you thawed out yet? Sub-zero days high across district

The Ninth District experienced a very cold and long winter. The National Climate Data Center keeps a detailed record of weather conditions at local airports. The Minneapolis area experienced 50 days of below-zero temperatures, the most in more than 35 years (see table).

If you prefer mild winters, there was almost nowhere to turn in the district. One of the more temperate places was Billings, Mont., which experienced “only” 20 below-zero days. In Fargo, N.D., three out of four days were bitterly cold this winter—the coldest winter since 1979.

District below zero days -- 4-2-14

Correct me if I’m wrong: State corrections spending up

States will spend $40 billion to incarcerate and supervise offenders in fiscal year 2014, according to a new report by the National Conference of State Legislatures. That’s 2.5 percent higher than the previous fiscal year, but there is a wide divergence in corrections spending among states.

North Dakota, for example, is seeing the second-highest spending increase this year among states, at 8.2 percent (see Chart 1), according to the NCSL report. South Dakota and Minnesota were other district states that saw costs rise faster than the national average.

Corrections CH1 -- 4-1-14

The reason for North Dakota’s big increase is largely tied to its booming economy, which is drawing many new people to the region, especially among a demographic (younger males) more prone to have run-ins with the law.

Data on prison population and other corrections activity are not as up to date as budget figures. But leading up to this year, North Dakota’s corrections system was seeing increased pressure. The state saw its prison population increase 25 percent from 2003 to 2009, a trend that has subsided somewhat more recently, rising 3.5 percent from (fiscal years) 2011 to 2013, according to the state’s Department of Corrections. But the number of offenders on parole or probation (and needing supervision) has risen 12 percent from June 2011 to June 2013 (see Chart 2).

The mix of inmates housed has also changed, with a sharp rise in violent offenders and an increase in sex offenders, while the number of inmates with drug offenses has declined considerably (see Chart 3; 2012 data are the most recent available). Among drug offenders, the number incarcerated for drug dealing has risen slightly (8 percent), while the number in prison for simple possession has been cut almost in half.

Corrections CH2-3 -- 4-1-14