117 posts categorized "Montana"

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

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).

The aches and pains of working-age disability

Since the 1980s, working-age disability has been rising, and particularly over the past decade. Many disorders can qualify a person for one of two major federal disability programs: Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

However, recipients are increasingly qualifying for these programs because of either mental disorders or conditions related to the musculoskeletal system or connective tissues, which covers a variety of muscle, back and joint disorders like arthritis, back pain, tendonitis and herniated discs.

In Ninth District states, the most common disability diagnosis (at 42 percent) for SSDI recipients is a mental disorder, such as anxiety, post-traumatic stress disorder, depression or bipolar disorder (see Chart 1). While recipient growth in this category exceeded 50 percent from 2003 to 2013, it has leveled off in recent years.

The fastest growing diagnosis involves conditions related to the musculoskeletal system and connective tissue. This category covered about one in four SSDI recipients in 2013; total recipients have doubled over the past decade. Growth in these two major diagnosis categories has also been faster in the Ninth District than in the nation over the past decade (see Chart 2).

For much more on disability trends in the Ninth District, see the January cover of the fedgazette.

Dulguun Batbold, research analyst, contributed data to this article.

Disability diagnosis CH1-2 -- 2-10-15


Mixed year for district mid-cap stocks in 2014

Stocks of mid-cap companies in the Ninth District had a lackluster year in 2014, closing the year with a less than 1 percent overall gain, following a 29 percent increase in 2013. Meanwhile, the benchmark S&P MidCap 400 Index increased 8 percent in 2014. Despite the 2014 performance, the longer-run trend in the district index remains broadly consistent with that in the larger S&P MidCap 400 Index (see Chart 1).

9th Dist stock index CH1 -- 1-26-15

Performance was mixed across companies in the index with gains in half almost offset by losses in the other half. The top performer was C. H. Robinson Worldwide, a freight transportation and logistics company based in Eden Prairie, Minn., which saw its market cap increase by $2.1 billion (24 percent) in 2014. Stratasys, a manufacturer of 3D printers also based in Eden Prairie had the largest loss at $2.3 billion (36 percent) of its market value.

In terms of sector composition, Ninth District companies in the services, basic materials and consumer goods sectors posted overall gains in market value (see Chart 2). The services sector had a particularly strong year in 2014, adding $4.9 billion in market cap. Notable performers in this category include the Buffalo Wild Wings restaurant chain (24 percent increase in market value), SuperValu, a food retail company (32 percent), and Patterson Cos., a medical equipment wholesaler (14 percent). Together, these performers added $1.9 billion in market capitalization to the sector total.

9th Dist stock index CH2 -- 1-26-15

In all other sectors, district mid-cap stocks posted overall decreases in market values. After Stratasys, worst performers included MDU Resources Group, a diversified utilities company based in Bismarck, N.D., whose market capitalization decreased by $1.2 billion (21 percent); Donaldson Company, a Minneapolis-based manufacturer of filtration systems, which dropped by $1.1 billion (17 percent); and Raven Industries, a diversified machinery producer based in Sioux Falls, S.D., with a $0.5 billion (36 percent) decline in market value.

The Ninth District Mid-Cap Stock Index applies a methodology similar to the one used by the S&P Midcap 400 Index to track changes in market valuations of mid-sized publicly traded companies headquartered in the district. For more details, see the index methodology.

Beige Book recap: Modest growth in Ninth District

Over the past two months, the Ninth District economy has seen modest growth, according to the latest Beige Book information released by the Federal Reserve Bank of Minneapolis. Increased activity was noted in consumer spending, professional services, manufacturing and non-energy mining. Activity was level in tourism and mixed in commercial construction, commercial real estate and agriculture. Energy, residential real estate and residential construction were down. Labor markets continued to tighten since the previous report. While overall wage increases remained modest, there were examples of steeper increases in some regions and industries.

Consumer spending and tourism: Consumer spending increased moderately. Mall and retail representatives across district states reported solid traffic and sales. Overall tourism was about level with a year ago, according to a variety of sources. Construction and real estate: Construction activity was mixed in the district’s larger cities. In Sioux Falls, S.D., the value of November commercial permits increased from a year ago, but fell in Billings, Mont.

Residential construction: Activity was mostly lower. In the Minneapolis-St. Paul area, the value of December residential permits decreased 9 percent from a year earlier and also dropped in the Bismarck, N.D. area (November data). Residential activity was stronger in Billings and Sioux Falls, however. Home sales were generally lower from a year earlier (in November). In the Sioux Falls area, home sales were down 12 percent, inventory increased 1 percent and the median sales price increased 6 percent relative to a year earlier. Sales were also down in northwestern Wisconsin, and the median sales price was 6 percent lower. Minnesota home sales were down 13 percent, inventories of homes for sale increased 5 percent and the median sales price rose 3 percent. Home sales in the Bismarck area were about level with last year.

Manufacturing: Activity increased slightly. A manufacturing index increased in December from the previous month in Minnesota and South Dakota, but fell slightly in North Dakota. However, the index pointed to continued expansion in all three states. Through October, manufactured exports in district states were up 1 percent compared with the same period a year earlier.

Energy and mining: The energy sector slowed slightly in response to lower output prices. Oil and gas exploration activity decreased in late December compared with a month earlier in Montana and North Dakota. Mining activity increased slightly. District iron ore mines were operating at or near capacity, with November production slightly higher than a year earlier.

Agriculture: Conditions remained mixed, with livestock and dairy producers faring better than crop farmers. A Minneapolis Fed third-quarter survey found that a majority of farm incomes had fallen from a year earlier and that capital spending also decreased. The fourth quarter outlook was also weaker, according to the survey. Prices received by farmers in December decreased from a year earlier for corn, soybeans, wheat, hay and milk; prices increased for cattle, hogs, eggs and poultry.

Employment and wages: Labor markets continued to tighten since the previous report. Overall wage increases remained modest, but there were examples of steeper increases in some regions and industries. Some construction firms in the Minneapolis-St. Paul area noted that labor costs have increased recently. In addition, some managers at Minneapolis-St. Paul area restaurants indicated that they were increasing wages to attract employees.

See the full Beige Book report for more details on the national and Ninth District performance.

Historic preservation: This old tax credit

Historic renovation activity over the past few years in Minnesota and Wisconsin points to the power of income tax incentives to spur rehabilitation of old buildings.

By defraying renovation expenses, historic rehabilitation tax credits are intended to save culturally significant structures that would otherwise deteriorate and eventually fall to the wrecking ball. Property owners can apply for a federal income tax credit worth 20 percent of the cost of restoring income-producing buildings, and in many states, state income tax credits that can be combined with the federal credit.

In 2013, the National Park Service accepted applications for renovation projects in Ninth District states (excluding Michigan) eligible for over $60 million in federal and state historic preservation tax credits, most of it in Minnesota and Wisconsin.

An unknown share of projects that received credits likely would have occurred without credits, or with the federal credit alone. In some cases, credits may serve to increase profits rather than provide the minimum return on investment necessary to make the project worthwhile. But data on historic rehab tax credit projects in Minnesota and Wisconsin indicate that more hammers swing on renovation projects when tax incentives increase.

In 2010, the Minnesota Legislature enacted a 20 percent historic preservation tax credit to match the federal credit, which was enacted in the 1970s. In subsequent years, the number of historic renovation projects applying for a tax credit (federal and/or state) rose sharply (see chart), although some of the increase was likely due to improved economic conditions in the wake of the Great Recession. Total estimated renovation costs also jumped.

In Wisconsin, historic tax credit projects surged last year after the state raised its modest 5 percent credit to the same level as Minnesota’s. From 2013 to 2014, estimated costs of active renovation projects swelled sevenfold to over $260 million, according to the Wisconsin state historic preservation office.

This apparent tax credit effect doesn’t necessarily mean that income tax credits are the best mechanism for fostering historic preservation. South Dakota has no historic preservation tax credit, but the state offers to freeze property tax assessments on rehabilitated buildings for eight years. In Minnesota, consumers support historic preservation through sales taxes allocated to arts and cultural heritage programs.

Other forms of financial support for historic preservation in the district and nationwide include rehabilitation grants funded by gaming revenue, the purchase of historic façade easements by cities and tax-deductible private donations.

Historic preservation

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

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.