140 posts categorized "Minnesota"

October Mid-America survey shows softness in Dakotas; Minnesota on top

Update from last week’s blog.

Results from the October Mid-America Business Conditions Index, released this week, show weakening conditions in the Dakotas and Minnesota. The index surveys supply managers monthly in a nine-state region, and an index greater than 50 indicates expected expansion over the next three to six months.

For the first time in recent memory, sentiment in North Dakota is hovering near contraction, with the state’s overall index declining to 54.8 and employment dropping to 51.2; both of South Dakota’s scores have continued a general descent of late, declining to 51.8. While Minnesota’s scores also dropped, it remains a bright spot, with its overall index at a healthy 63.7, with employment at 56.7.

Mid-America UPDATE -- 11-4-14

Sure it’s cold, but we’re upwardly mobile

If you live in a Ninth District state, which do you prefer, moving out or moving up? Probably the former if you don’t like the cold, but likely the latter in most other cases. And while Ninth District states have cold winters, so too do they offer better upward income mobility than the nation overall, according to data from a team of researchers from Harvard and UC-Berkeley.

The research project, dubbed Equality of Opportunity, collected income data on millions of parents in the last half of the 1990s. It then tracked how kids from low-income families in this sample fared in 2011 and 2012, when they were in their early 30s. (For more information on the study’s methodology, go here.)

The study split the country into more than 700 commuting zones, which are rough approximations of local economies (urban and rural). It then ranked commuting zones for absolute upward mobility—roughly, the average national income rank of a child from low-income parents in the commuting zone.

The data show that Ninth District states stand out for high absolute upward mobility. The distribution of scores for commuting zones in every district state (including the combined region of northwestern Wisconsin and the Upper Peninsula of Michigan) skewed higher than scores for all other commuting zones not in the Ninth District (see charts below).

For more data and discussion on this topic, see the October fedgazette for in-depth articles on both high income mobility and low income mobility in the Ninth District.

  Absolute income distribution 9th states -- 11-13-14

Surveys: District manufacturing, state economies seeing fluctuation

Amid the news of falling oil prices and a slowing global economy in contrast to a comparatively strong U.S. economy, two monthly surveys by Creighton University offer a somewhat muddled picture of economic growth in three Ninth District states.

The Rural Mainstreet Index asks community bank presidents and CEOs in rural areas of a 10-state region (including Minnesota and the Dakotas) about current economic conditions and six-month outlook in roughly 200 small communities.

Since mid-2013, the overall index has stayed mostly in expansion territory (an index score of 50 or more). But the index has dipped into contraction on a couple of occasions—particularly for South Dakota—and the general slope of sentiment is slightly downward (see Chart 1).

The good news: Respondents have been upbeat on new hires, with particularly strong scores in Minnesota and North Dakota. The less good news: Sentiment toward farmland prices has tumbled, especially in Minnesota and South Dakota, most likely stemming from low crop prices over this period. Aside from a single-month blip, North Dakota’s farmland index has stay strongly in expansion territory, most likely the result of the state’s very strong economy, with farmland prices possibly being buoyed by demand from nonfarmers.

Mid-America Ch1 -- 10-31-14

A second survey by Creighton, the Mid-America Business Conditions Index, compiles monthly data from manufacturing, purchasing and supply executives in the same 10-state region (and also including Minnesota and the Dakotas). Overall, respondents in these Ninth District states have reported solid expansion, with the overall index slightly upward over the past year (see Chart 2). After a big uptick in employment sentiment, index scores dropped over the summer, but respondents in Minnesota and North Dakota continued to see healthy expansion in the latest surveys. In both manufacturing indexes (overall and employment), South Dakota has seen its scores dip of late, and they appear to be trending downward.

Mid-America Ch2 -- 10-31-14

A summer of steady growth in the Ninth District

The Ninth District economy continued to show signs of steady growth through the summer months, characterized by job growth, decreases in unemployment rates and gains in home building.

As of August, nonfarm employment in district states was up 1.8 percent relative to a year ago, posting a net increase of about 122,000 jobs. North Dakota reported the strongest employment growth among district states, accounting for about one in every six jobs added in the Ninth District over the past 12 months despite the state’s workforce comprising only 7 percent of the district total. Employment growth in other district states was largely in line with the national trend (up 1.8 percent), except in South Dakota, where nonfarm employment growth was 0.7 percent.

The district unemployment rate dropped to 4.7 percent over the same period, down 0.8 percentage points from a year ago. The spread in unemployment rates among district states has narrowed over the past 12 months. Regions with relatively high unemployment rates, such as the Upper Peninsula of Michigan, Wisconsin and Montana, posted larger year-over-year declines than Minnesota and the Dakotas, where unemployment rates started out much lower last year.

Manufacturing wage growth in the district slowed to 1.4 percent during the three-month period ending in August, compared with a growth rate of 2.5 percent during the same period a year earlier. With the exception of North Dakota and Wisconsin, growth in manufacturing wages in district states was below the national average of 1.6 percent. Montana’s manufacturing workers reported the lowest year-over-year growth rate in hourly earnings among district states, which barely reversed the flat or declining trend in manufacturing wages in the state for much of 2013 and early 2014.

During second quarter 2014, personal income growth (adjusted for inflation) across district states was positive, posting a 2.2 percent overall increase relative to a year ago for the district. Except for North Dakota, all district states posted lower personal income growth rates relative to the national average of 2.4 percent, while South Dakota’s state ranking in growth was near the bottom.

New housing authorizations for the three-month period ending in August were up 8.2 percent in district states; however, rates varied widely among district states. Montana and South Dakota posted year-over-year declines of over 20 percent in new housing authorizations, while North Dakota showed a 42 percent increase over the same period. Housing authorizations in Minnesota and Wisconsin were up 5 percent and 10 percent, respectively, closer to the national average of 7.7 percent.

Home prices continued to show increases in several district cities. During the second quarter of 2014, home prices were 7.4 percent higher than a year ago in Bismarck, N.D., 6.7 percent higher in Minneapolis-St. Paul, 3.2 percent higher in Fargo, N.D., and 2.6 percent higher in Sioux Falls, S.D. Nationally, home prices increased by 4.4 percent during the same period.

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.

Minnesota: The land of 10,000 deep-fried things

The annual Minnesota State Fair finished on a high note this year, setting an attendance record of 1.82 million. The state’s fair is known for its unusual popularity compared with fairs of other states, and it is the second-largest state fair in the nation, second only to Texas.

The fair’s popularity has continued to grow slowly and steadily over time, with only occasional and modest declines in annual attendance (see chart). One of the reasons for this steady attendance pattern likely has something to do with simple population growth. Since 1990, the Minnesota State Fair has typically attracted the equivalent of about one of every three residents (fluctuating modestly between about 31 percent and 36 percent of the state population in a given year). As the population has grown, so too has State Fair attendance.

That doesn’t, however, explain why the Minnesota State Fair is popular to more of its residents than those of other states. For example, attendance at the Wisconsin State Fair represents fewer than one in five state residents. The State Fair of Texas attracts about 2.8 million visitors (over 24 days, compared to Minnesota’s 11 days). Still, that works out to barely one in 10 residents of the Lone Star State.

State Fair attendance -- 10-15-14

Farmland sales down in Ninth District

After several years of big increases, there are mounting indications that farmland prices have started to moderate. The change in the quantity of farmland bought and sold can offer added insight into what’s going on in that market.

The volume of farmland sales is harder to verify because no central agency tracks land sales nationally. Further, there are relatively few transactions, and individual pieces of land don’t change hands very frequently, often less than once a generation. For instance, in Minnesota, one of the only states for which a detailed record of land transactions is available, just under 120,000 acres were sold in 2013, out of 26 million farm acres in the state.

For this reason, the Minneapolis Fed’s second quarter (July) Survey of Agricultural Credit Conditions asked lenders a special question on land sales: “How does the volume of farmland sales this year compare to last year in your area?” As the chart shows, most respondents reported that the number of sales was down.

Farmland sales -- 9-24-14

A Minnesota lender said that the “land market is really a big guess, as very little [is] selling,” adding that the expectation was for “prices to decline as grain prices fall.”

These findings suggest that falling crop prices are helping to lower demand among farmland buyers, causing farmland values to level off (as economic theory would imply). Fewer farmland sales also imply that rather than selling into a plateauing market, farmers appear to be holding tight to their land at the moment.

Metro GDP: Move over Bismarck; Billings is top performer

The Bureau of Economic Analysis recently released estimates of 2013 gross domestic product for metropolitan statistical areas. Ten of the 15 Ninth District MSAs beat the national MSA average of 1.7 percent growth.

Billings was the top-ranked MSA in the Ninth District, at 7.1 percent, 11th best out of the 381 U.S. MSAs in growth rate, followed closely by Bismarck at 6.9 percent. However, not all metros are seeing strong growth. Both Great Falls and Missoula lost GDP in 2013 when compared with 2012, and three others failed to match the modest national average for MSAs.

MSA growth also has varying influence on state economies because output concentration differs across district states. Minnesota MSAs, for example, account for 84 percent of the total output for the state, while Montana MSAs account for only 38 percent of total output.

MSA GDP table -- 9-22-14

Farmland values still soaring? Not so fast

In early August, the USDA released its annual estimates of farmland values, showing an increase of 7.6 percent for U.S. cropland in 2014 over a year earlier. Values in the district were up even more; South Dakota saw the biggest increase in the country at 20.8 percent (see table). This was something of a surprise, given results from the Minneapolis Fed’s second-quarter survey of agricultural credit conditions, which indicate that farmland price growth has slowed and even decreased in some cases.

USDA table -- 8-28-14

One reason for the discrepancy is obvious—the numbers come from different surveys. The Fed survey covers lenders, while the USDA’s covers landowners themselves and is also much larger and more thorough. But another reason USDA land values showed a bigger jump this year goes back to June, when earlier USDA estimates of 2009-13 land values were revised. In most states, earlier values were revised down, which makes the increase in 2014 look bigger than it otherwise would have.

For example, the USDA estimated that Minnesota cropland sold for $4,850 an acre when it released its summary in August 2013. Last June, it revised that estimate down to $4,050 an acre, 9.5 percent less than the earlier estimate. The newly released 2014 Minnesota estimate of $4,870 is nearly unchanged from the earlier 2013 number, so much of the apparent jump this year reflects a downward revision of last year’s statistics (see chart).

Given the larger sample size and rigorous methodology, the USDA survey is a better indicator than the Fed’s. But the revisions suggest that land prices may not have grown as much in 2013 and earlier years as initially thought.

USDA farmland chart -- 8-28-14

Russia’s retaliatory sanctions have little effect on district exports

The direct economic effect of Russia’s retaliatory sanctions banning certain food and agricultural product imports from the United States is likely to be minimal for the Ninth District.

The list of products covered by these sanctions effective Aug. 7 includes all categories of (slaughtered) beef, pork, poultry and fish; most categories of milk and milk-based products, including cheeses and curds as well as a number of categories of fresh fruits, nuts and vegetables.

• Based on 2013 data, Russian sanctions would cover about $750 million of U.S. exports, representing 7 percent of U.S. exports to Russia and 0.05 percent of total U.S. exports.

• In the same year, Ninth District states exported $9 million worth of food and agricultural products to Russia now subject to sanctions, which account for 3 percent of district exports to Russia and 0.02 percent of total exports from the district (see chart).

• One of the reasons for the small impact is that sanctions notably do not cover sales of live animals, which accounted for 40 percent of the district’s agricultural exports to Russia last year. The list also excludes cereals and grains, as well as fruits, nuts and vegetables if prepared or preserved.

• Among Ninth District states, Wisconsin is most affected, particularly its concentrated or sweetened milk producers, exporters of frozen fruits and nuts, and kidney bean and white pea bean farmers, for whom the Russian market accounted for 17, 12 and 11 percent of total exports, respectively.

Exports also make up only a portion of total farm receipts, further dampening any potential impact. According to 2012 USDA data, for example, Wisconsin’s export revenues accounted for about 27 percent of total farm receipts and about 14 percent of total receipts from dairy products, its top agricultural commodity.

Russian food sanctions -- 8-26-14

Business survey: Ninth District should continue to grow

Results from a Federal Reserve Bank of Minneapolis ad hoc survey of 603 Ninth District firms (see methodology) reveals that economic activity at firms across industry sectors increased over the past four quarters and should continue over the next four quarters (see table).

Looking back: Firms across industries reported increased sales revenue, profits, productivity and employment. The availability of labor decreased, especially in the construction sector, where the majority of respondents reported a lack of available labor. Respondents from most sectors reported increases in selling prices and input costs. Wage and benefit increases were moderate. They also noted an uptick in availability of financing.

Looking forward: Respondents are more optimistic for the next four quarters, as a higher proportion of respondents reported expectations for increased sales revenue, profits, productivity and employment. The availability of labor is expected to continue to decrease. Respondents expect to raise prices and pay more for inputs. However, wage and benefit increases are expected to be moderate.

State economic outlook: Respondents expect their state economies to grow as well. Employment, consumer spending and profits are all expected to increase. However, the vast majority of respondents across industries expect inflation to increase.

August ad hoc table -- 8-21-14

Ad hoc survey methodology: On Monday, August 18, an email was sent to 5,000 contacts (not a random sample) from various sectors around the Ninth District. By 12 noon Wednesday, August 20, 603 responses were received, representing a 12 percent response rate. The largest number of responses came from finance (24 percent), professional services (20 percent), manufacturing (15 percent), real estate (13 percent), construction (8 percent) and nonprofits (7 percent).

 

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