155 posts categorized "Minnesota"

Business activity continues to improve in Ninth District

Business activity in the Ninth District is above average and has improved over the past three months, based on a recent poll of 105 business contacts from around the district (see methodology). Improvements were seen across many industry sectors.

 Fifty-five percent of responding Ninth District firms reported that current business activity is above average or well above average, while only 6 percent reported that activity is below average. More than half of respondents said that business conditions have improved over the previous three months, while only 14 percent reported slightly worsening conditions, and none reported that conditions have worsened greatly. Respondents in real estate, construction, professional services and financial services were the most positive about current business activity, while manufacturers were much more mixed in their reports.

When those surveyed were asked about retail sales in their community, 40 percent of the responding firms noted that retail spending has been increasing over the past three months. Only 12 percent reported that retail sales have decreased.

Construction also appears to be growing, as almost two-thirds of responding firms said that construction activity in their communities was above average or better, and only 8 percent reported below-average activity. More than three-quarters of respondents also indicated that conditions in the construction sector had improved over the past year, and respondents in the construction industry were even more upbeat.

Recent changes in the value of the dollar had no impact on sales or costs, according to 71 percent of respondents. The remainder was split evenly between those reporting a positive and negative influence on sales, though manufacturers as a whole reported more negative effects, and they expect this drag on sales to continue.

Methodology: On May 11, 2015, the Minneapolis Fed emailed a web-based survey to about 600 Beige Book contacts from around the Ninth District. By May 12, 105 contacts had filled out the survey. The respondents come from a variety of industries (see table).

Ad hoc -- 5-21-15

More recharging personal batteries at national parks

Even in the digital age—or maybe because of it—the great outdoors continues to be a tourism draw, as evidenced by growing visits to the country’s national parks, according to data from the National Park Service (NPS). And those visits are translating to the Ninth District economy.

Attendance has been trending upward at many parks, especially since the recession. Last year, attendance grew 6 percent among the 13 national parks in the Ninth District with annual attendance of at least 100,000, and is up almost 20 percent since 2008 (see Chart 1). In 2014, attendance at these district parks hit 9 million for the first time.

Among these large national parks in the district, two of them—Mount Rushmore in South Dakota and Glacier National in Montana—are responsible for half of all visitors. (The list does not include Yellowstone, portions of which are in Montana, but which lies mostly in Wyoming.) The biggest jump in attendance last year occurred at the Apostle Island National Park. Located in Lake Superior off the northern tip of Wisconsin, it saw attendance double to almost 300,000 in 2014 thanks to an impressive formation of ice caves on the island, coupled with a uniquely long viewing period.

Those visitors are spending money and creating jobs, according to a separate NPS database. Visitor spending hit nearly $1.2 billion last year, supporting more than 20,000 jobs (see Chart 2) in district states.

National parks

Minnesota foundations: Give ’til it hurts so good

Like the saying goes, it matters where you grow up. So it is with nonprofits in Minnesota, which benefit from generous giving from foundation and corporate grantmakers.

Corporate and foundation contributions make up a small portion of charitable giving (25 to 30 percent) and an even smaller portion of total nonprofit revenue. Still, corporate and foundation giving plays an important financial role for many nonprofits, and this giving often comes in big chunks critical for new or expanded services.

In that vein, Minnesota nonprofits are blessed with a large institutional giving sector, whose charitable contributions are considerably larger than those in neighboring district states, even on a per capita basis.

For example, in 2012 (the most recent year with comparable state data), Minnesota foundations gave roughly twice as much to charitable causes as the four other Ninth District states combined, according to the Foundation Center (see Chart 1). One of the reasons for this big gap has to do with foundation assets. For example, Wisconsin has almost 40 percent more in-state foundations than Minnesota, but only half the total assets ($8 billion vs. $16 billion), according to the Foundation Center.

Minnesota also has a number of very large corporations, with affiliated foundations, headquartered in the state. In 2013, the top 25 corporate foundations in Minnesota—which include the likes of Target, General Mills and Cargill—gifted $146 million to in-state organizations (see Chart 2), along with more than $500 million to non-Minnesota organizations, according to the Minnesota Council on Foundations.

For more discussion of charitable giving and other trends affecting nonprofits, look for the upcoming April issue of the fedgazette.

Foundations Ch1-2 -- 4-9-15


The waiting game: Wait times at VA health centers vary across Ninth District states

Going to the doctor is not always fun. But waiting for the doctor can be worse. Much attention has been paid to wait times for military veterans seeking care at Department of Veterans Affairs (VA) medical centers across the country, and data from the VA show that wait times vary significantly among VA health care systems in Ninth District states.

For example, the percentage of pending appointments that are scheduled more than 30 days after the preferred date runs as low as 1 percent (Fargo, N.D.) to 10 percent (Milwaukee, Wis.), according to VA data released this month for appointments through March 15, 2015. The likelihood of waiting also appears unrelated to volume; for example, the Minneapolis office, which had 73,000 pending appointments at 11 health centers across the state, has a lower average wait rate than Milwaukee, which has 58,000 appointments on the books at six facilities.

Field facilities within a specific VA district also vary considerably. For example, at Montana’s busiest VA facility (Fort Harrison), nearly 16 percent of appointments are scheduled more than 30 days past the preferred date, while the rate is 4.4 percent in Billings. But again, volume isn’t necessarily the culprit. The Iron Mountain district serves the Upper Peninsula of Michigan. Its busiest facility (in Iron Mountain) had a 30-day wait rate of 5.7 percent, while the Marquette facility—with one-quarter of the appointments—had a wait rate of 13.2 percent.

VA wait times -- 4-9-15

A bumper crop of storage

A bumper 2014 harvest combined with low prices has piled up crops at grain elevators and on farms in the district.

Last fall, growers in five district states (excluding Michigan’s Upper Peninsula) harvested about 4.4 billion bushels of corn, soybeans and wheat, according to government statistics. That was 3 percent more than the previous year and the largest harvest of those major district crops in the last five years. A decline in crop prices since 2013 induced many farmers to store their crops over the winter rather than ship them to market via rail or river barge.

The result was a cornucopia of stored crops; the U.S. Department of Agriculture estimated that December stocks of corn, soybeans and wheat increased 7 percent over 2013, pushing up crop storage (see Chart 1). Almost 3.5 billion bushels of crops—equal to about 80 percent of the 2014 harvest—was held at grain elevators, other commercial storage facilities or on the farm. (That amount included unprocessed crops left over from the 2013 harvest.)

Storage on farms -- 4-6-15 CH1-2

About 40 percent of crops were stored in Minnesota (see Chart 2), the top producer among district states of corn, the region’s biggest cash crop. And in every district state, a large share of crops was stored on farms in silos or bins. Over the past 15 years, farmers have invested substantially in on-farm storage to avoid paying for off-farm storage.

“Given the low prices, every square inch of on-farm storage was utilized this year,”’ said Bob Zelenka, executive director of the Minnesota Grain and Feed Association, which represents rural elevators and feed mills.

Regardless of crop prices, farmers are expected to ship large quantities of stored crops to market by the summer. This has raised concerns about renewed congestion on freight railroads, which transport the bulk of agricultural commodities in the district.

Railroad capacity in the district last year was strained by severe weather and rising freight volumes, including increased shipments of crude oil. For much more on railroad capacity in the district, see the upcoming April issue of the fedgazette.

Ninth District economy grew in January and February

Oil has dominated the headlines, but the Ninth District economy continued to expand in January and February, with many indicators exhibiting strength and labor markets appearing to have tightened. Several sectors, particularly energy and other commodities, are dealing with low prices. But counteractive, positive conditions for consumers and others helped limit the negative effects. Mild winter weather has had similarly mixed effects.

A wide swath of sectors saw growth. For example, a manufacturing index increased, indicating expansion in the Dakotas and Minnesota. A manufacturer of capital equipment reported that demand in January was stronger than expected. In the services sector, a merger and acquisition services firm noted increased consulting activity and a web design and programming firm noted increased interest from newer firms. In addition, railroads plan to invest more in capital equipment in 2015, and several retailers noted sales increases.

Labor markets continued to tighten, as unemployment rates dropped in many areas of the district. Business owners in South Dakota and western Montana noted difficulty finding workers to fill open positions. A Minnesota staffing firm reported that finding workers was difficult and that competition for those workers increased recently.

As labor markets have tightened, wage pressures appear to have increased in some areas. While data suggest that overall wage increases have been moderate, there were more frequent reports of wage increases above 3 percent during the past couple of months. A recent ad hoc survey by the Minneapolis Fed also found that more employers planned to increase starting pay. Nevertheless, overall wage increases generally remained moderate. Lower energy and other commodities prices affected different regions of the Ninth District.

Lower oil prices affected producers as they cut back on new development in North Dakota and Montana by nearly 30 percent from the beginning of the year, leading to reduced hours and layoffs of oilfield workers (see chart). The number of job postings in the region has also decreased, but several companies in various sectors are still looking for employees. Wage pressures and apartment rental prices have eased somewhat in the energy-producing region.

Beige book blog 3-10-15

Among other commodities, the evidence is mixed. For example, lower metal prices caused a Montana copper-silver mine to shut down. Even though iron ore prices have been dropping, an iron ore analyst expects production to increase slightly in 2015. Low crop prices have hampered farmers, but benefited animal producers due to lower feed costs.

While some sectors have suffered from lower commodity prices, district consumers have benefited. For example, Minnesota gasoline prices in mid-February were over a dollar per gallon lower than a year ago. This may have helped boost consumer spending, as district retailers noted growth in retail sales. For example, a North Dakota mall noted that sales were up in January compared with a year ago, and a bar and restaurant chain in Minnesota reported strong sales during January compared with last year. Recent light truck and car sales were relatively solid in Montana, according to a representative of an auto dealers association.

The increasing value of the dollar has made U.S. products more expensive for foreigners. For example, the stronger U.S. dollar and Canadian exchange rate dampened demand from Canadian tourists and shoppers as border crossings and related sales decreased in district states.

The winter has been relatively warm and dry, which aided commercial construction firms that were able to build more and required less heating. Ranchers benefited from less winter stress on their animals. However, not all benefited from mild weather. Several auto body shops complained they had less demand due to better driving conditions that reduced accidents. Some apparel stores had difficulty selling winter clothing due to relatively mild weather conditions during December and January. In addition, a lack of snow slowed winter tourism activity in several areas.

Ninth District foreclosures declining, staying ahead of nation

While home sales in 2014 were not particularly strong, the housing market is showing continued strength in terms of foreclosures, which have ratcheted down from very high rates as recently as 2012, according to data from CoreLogic, a real estate and financial services analytics firm.

Over the 24-month period ending this past January, district states saw the number of completed foreclosures drop by between 34 percent (North Dakota) and 57 percent (Minnesota). This comes on top of the fact that the proportion of troubled mortgages in district states is lower than the national average.

The national rate of seriously delinquent loans currently stands at 4 percent—its lowest level since 2008, according to CoreLogic. But delinquency rates have also been falling in district states and are a fraction of the national rate, with North Dakota’s rate at just 1 percent.

Foreclosures -- 3-10-15



 

College enrollments falling in Ninth District, nationwide

Something is happening on college campuses across the country—or rather, not happening.

Despite all the messages encouraging college attendance—not to mention job and other data that demonstrate its utility—higher education enrollments have been dropping steadily in recent years, according to data from the National Student Clearinghouse Research Center.

Every state in the Ninth District has witnessed an enrollment drop at degree-granting higher education institutions for at least two consecutive years. The drop from fall 2012 to fall 2014 was highest in Montana, at almost 6 percent, while North Dakota and Minnesota were also above the national average (see chart). In fact, save for South Dakota, enrollments have declined in every other district state for at least three years running.

Some of the reason behind the drop is a cyclical economy. Joblessness, for example, tends to push people into school to obtain better skills for the job market, and enrollments swelled during the Great Recession. A stronger job market is likely pulling many students away from their books.

Demographics are also playing a key role. When national higher education enrollment peaked in 2011, people in their so-called prime college years (18 to 21 years old) were also at their peak and have since declined, leading to lower enrollments.

College enrollments -- 2-26-15

Minnesota consumers benefiting from a drop in gasoline prices

 As oil prices have plummeted, so have gasoline prices, since the price of crude oil represents more than half the cost of a gallon of gasoline (see Chart 1).

In Janaury, the price for regular Minnesota gasoline dropped below $2 per gallon, more than $1 per gallon lower than a year earlier. Through the first week of February, Minnesota gasoline prices have picked up by about 20 cents per gallon, but are still about $1 per gallon lower than last year. Gas prices haven’t been consistently below $2 per gallon (other than a six-month period during the Great Recession) since 2004 and earlier.

MN gas prices CH1

As gasoline prices drop, consumers have more disposable income to spend on goods and services other than gas. According the Bureau of Labor Statistics Consumer Expenditure Survey data, a $1 per gallon decrease in gasoline prices over a year’s time could provide consumers with an additional $400 to $1,200, depending on how much they typically spend on gasoline (see Chart 2). Consumers with lower income tend to spend less on gasoline than those with higher income.

As a share of total expenditure, consumers in the highest income quintile spend a smaller share on gasoline and motor oil than those in lower quintiles (see Chart 3).

Retail sales data are not yet showing an impact from low gasoline prices. According to U.S. retail sales data, while gasoline prices and sales at gasoline stations dropped notably in December and January, there were only mild increases in U.S. retail sales after removing sales at auto dealers and gasoline stations. Consumers could be spending their extra disposable income on items not recorded in retail sales figures, such as utility, cable or medical bills, or putting it into savings.

MN gas prices CH2-3

Ad hoc survey: Ninth District businesses plan to ramp up hiring, increase starting pay

The Ninth District economy is in growth mode and employment is expected to increase, based on a recent poll of 140 business contacts from around the district (see methodology below).

Businesses are expecting to expand, with 46 percent of respondents planning to increase employment at their firms and 58 percent of these firms citing anticipated high sales growth as the most important factor behind increased employment. Only 3 percent plan to decrease employment. In the same survey a year ago, 41 percent planned to increase employment and 9 percent planned to cut jobs (see chart).

Other important factors cited for new hiring were overworked staff, the need for additional skills and improved financial condition of firms. The vast majority of respondents plan to use current employee referrals, word of mouth and advertising to get new employees. Forty-eight percent plan to use a recruiting firm, which is up from 22 percent of respondents in last year’s poll. Twenty-seven percent of respondents also plan to raise starting pay compared with only 8 percent last year.

Feb ad hoc survey Ch1+meth -- 2-13-15

Methodology: On Dec. 1, 2014, the Minneapolis Fed emailed a web-based survey to about 600 Beige Book contacts from around the Ninth District. By Feb. 12, 140 contacts had filled out the survey. The respondents come from a variety of industries (see table).