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F E D E R A L R E S E R V E B A N K O F M I N N E A P O L I S JULY 2010

fedgazette
V O L . 22 NO. 3

Regional Business & Economics Newspaper minneapolisfed.org

More on the Recession …

THE LITTLE ECONOMIC


E N G I N E T H AT C O U L D RECESSION AND THE NINTH DISTRICT
page 6

North Dakota’s success goes


deeper than an oil well. When half-full feels more
………………………………………………

S I N G S W E E T LY ( P L E A S E ) ,
EMPLOYMENT C ANARY
like three-quarters
page 8
Staffing firms suggest some job recovery.

SHORT SALES
S TA N D TA L L page 9

Sellers and mortgage holders


take what they can get.

M O N E Y T O B U R N page 11

Fighting the cost of wildfires.

By TERRY J. FITZGERALD
Senior Economist

SWEET PRODUCTIVITY WONHO CHUNG


Research Assistant
page 16
RONALD A. WIRTZ
An interview with Minneapolis
Editor
Fed economist James Schmitz.

H ere’s a recession version of the


Myers-Briggs personality test:
Having lived through one of
the worst economic periods in America
the likely envy of peers nationwide
because they have generally suffered
less economically.
That “suffering lite” notion might
ing and general economic growth lead-
ing into the recession.
Economists credit an abundance of
developable land for helping to restrain
over the past half-century, are you now not exactly replace any state mottos (“At the rise in housing prices, while many
D I S T R I C T D ATA economically half-full or half-empty? least we’re not you!”) but it’s nonethe- sources attribute the region’s resilience
That probably depends on with whom less a palpable perception in much of to a conservative culture in the Midwest
or what you compare yourself, whether it the Ninth District. The data say so, in and Great Plains that forgoes some eco-
Exports 18 be the neighbors next door, people in fact. Compared with the country as a nomic gung-ho in exchange for less eco-
the state nearby or the people and places whole, unemployment levels were low nomic oh-no.
Services survey 20 nationwide profiled in myriad news arti- in district states leading into the reces- Supporting what the data say, many
cles. Your own circumstances—what life sion, and a lower percentage of workers people across the district—though not
Forecast 21 was like a few years ago—likely plays a have subsequently lost their jobs. It’s all, of course—acknowledge that their
role in your outlook as well. hard to pin down exactly why this hap- city, region or state is faring better than
Data map 24 But by most of these parameters, pened, but some of this “less bad” per- their peers nationwide. An over-the-
Ninth District states should be a gener- formance appears to stem from the sta- shoulder optimism is becoming more
ally cheery group. Though they have bilizing effect of a relatively good farm noticeable.
definitely felt the recession’s sting, dis- economy during the recession, and the “If we were in Florida, I would say, ‘Oh
trict states and regions are nonetheless comparatively moderate pace of hous- my God, we’re [still] in a recession,’” said
Continued on page 2
fedgazette RECESSION JULY 2010
Page 2

Unemployment rate,* December 2009


Divide Renville Bottineau
15 Daniels Sheridan Burke Rolette Towner Cavalier Pembina Kittson Roseau
Glacier Lake
Lincoln Toole Liberty Hill of the
Williams Pierce Woods
Blaine Phillips Valley
Roosevelt Walsh 29 Marshall
Flathead Ramsey
Pondera Mountrail McHenry Koochiching
Benson
Ward Pennington
Grand
Nelson Forks Red Lake Beltrami Cook
Teton Chouteau Richland
Lake McKenzie McLean Eddy
Sanders Polk Clearwater
McCone Sheridan Wells Itasca St. Louis Lake
Foster Griggs Steele Traill Keweenaw
Missoula Dunn Mercer Norman Mahnomen
Lewis 15 Cascade Fergus Garfield Dawson
and Petroleum Golden
Clark Billings Oliver Hubbard Cass Houghton
Mineral Judith Basin Valley Burleigh Kidder
Prairie 94 Stutsman Barnes Cass Becker
Morton 94 Clay
Wibaux Stark Ontonagon
90
Powell Rosebud Crow Aitkin Carlton Baraga
Wadena
Meagher Musselshell Logan Wilkin Wing Gogebic
Wheatland Slope Hettinger La Moure Ransom Douglas Bayfield Marquette Luce
Granite Broadwater Golden Fallon Otter Tail Chippewa
Valley Treasure Grant Alger Schoolcraft
Emmons Richland 35 Iron Iron 75
Yellowstone Custer Sioux Mille Pine
Deer 94 Bowman Adams McIntosh Dickey Sargent Todd Ashland Dickinson
Ravalli Lacs Vilas Delta
Lodge Jefferson Gallatin Sweet Morrison Mackinac
Silver Douglas Kanabec Washburn
Grass Grant Burnett Sawyer Florence
Bow Stillwater Corson Campbell McPherson Marshall Traverse
Harding Benton Price Oneida
Roberts Stevens Pope
94 Stearns
Polk Forest Menominee
Carter Perkins Brown Big Isanti
Beaverhead Edmunds Sherburne Chisago
Rusk
Stone Barron
Park Big Horn Powder River Walworth Day Anoka Lincoln
15 Madison Swift Langlade
Carbon 90 Kandiyohi Wright Washington Taylor
Dewey 29
Grant
Potter Faulk Chippewa Meeker Hennepin Ramsey Chippewa
Lac qui KEY
25 Codington St. Croix Dunn
Yellowstone NP Butte Spink Parle Carver
Ziebach Clark McLeod
Sully Deuel Yellow Medicine Pierce
Hamlin Renville
Scott Dakota Pepin
Eau Claire <4%
Meade Hyde Hand Sibley
Beadle Lincoln Redwood Le Goodhue Buffalo
Lawrence
Hughes Kingsbury Brookings Lyon Nicollet Sueur Rice Wabasha Trempealeau
4%–<6%
Haakon Stanley
90 Brown
Buffalo Jerauld Sanborn Lake Pipestone Cottonwood Blue Waseca
35
6%–<8%
Pennington Jones Lyman Miner Moody Murray Olmsted Winona La Crosse
Watonwan Earth Steele Dodge
90
Brule Aurora Hanson 8%–<9.3%
Mower 90 Fillmore
*Not seasonally adjusted Custer Jackson
Mellette
90
Davison
McCook Minnehaha Rock Nobles
90
Jackson Martin Faribault Freeborn Houston

Douglas 9.3%–<11%
Hutchinson Turner
Fall River Shannon Bennett Todd Tripp Gregory Lincoln
Source: Bureau of Labor Statistics Charles Mix
Bon Yankton
Homme
>11%
Clay
Union

Recession from page 1


The longest recession in generations has left deep economic, Entire regions in the Ninth District
Bob McCoy, president of the Eau Claire emotional and even policy scars. Though district states may have have been trampled by the recession,
(Wis.) Chamber of Commerce. But in including the very eastern and western
Eau Claire, “we don’t feel that because been less brutalized compared with places like California, Florida edges (see maps). Michigan is Exhibit A.
we don’t have those big swings.” and Nevada, all have watched unemployment rates rise, businesses The state saw its unemployment rate sky-
Go west, and you’ll bump into Steve rocket from 8.3 percent in 2008 to 13.6
Scheel, who knows a little something go under, foreclosure signs go up and families struggle. percent last year—both well above the
about recessions. He’s the CEO of national average. Statistically speaking,
Scheels, a 23-store sporting goods chain states have fared well in comparison to struggle. (For more information on the nowhere in the Upper Peninsula (the only
headquartered in Fargo, N.D., with other states nationally. ... I hear people comparative depth of this recession, go portion of Michigan that lies within the
stores in eight states, running from say often, ‘We’re not as bad off as most.’” online to “Recession in Perspective” at Ninth District) do conditions look positive.
Wisconsin and Nebraska west to minneapolisfed.org.) Baraga and Mackinac counties bear unem-
Nevada, and including the two largest Though recessions are often viewed as ployment rates topping 27 percent.
all-sporting-goods stores in the world.
First, the bad news communal tragedies, they never evenly On the good side—if you can call it
Scheel, the great-grandson of founder It must be stressed that this is a positive, distribute economic pain and dislocation. that—its largest county (Marquette) has
Frederick Scheel, has been in the busi- “if life gives you lemons” spin on a That some people and regions relatively the lowest unemployment rate in the
ness for 39 years, and despite some mis- crushing economic event nationwide. close by have experienced less pain is like- U.P., and one of the state’s lowest. Still,
steps recently—like opening a huge new The Great Recession should no ly cold solace to those directly and harsh- its 11.2 percent rate at the end of last
store in recession-shocked Nevada—“we longer need an introduction. It has ly affected. Today, many in the Ninth year was higher than the national aver-
are a stronger force in retail today than flipped people, businesses and entire District still don’t view their local econo- age and the vast majority of county aver-
we were three years ago.” regions on their heads and shaken them my or individual prospects very positively. ages across the Ninth District.
At the western edge of the Ninth for loose change. Led—and intensi- Mary Trembley, an investment execu- But scratch the surface a little, and
District, things are not exactly exuberant fied—by a collapse in financial markets, tive with Raymond James in Anoka, you’ll start to hear a different story from
in Helena, Mont., according to Mike the longest recession in generations has Minn., said by e-mail that her profession officials in and around Marquette than
Mundt, senior vice president of left deep economic, emotional and even allows her to “see how [people] are feel- the one told by government data. For
American Federal Savings Bank. Asked policy scars. Though district states may ing about the economy and the markets. example, you won’t find city of
about the regional mood, Mundt said it have been less brutalized compared … General consent seems to be that we Marquette Mayor John Kivela crying
was merely “slightly upbeat,” but he with places like California, Florida and are all still struggling.” Trembley, also a over his luncheon pasties.
acknowledged that it ranked ahead of Nevada, all have watched unemploy- board member of the Anoka Area “I would say we’re pretty optimistic.
many communities. “Most of us recog- ment rates rise, businesses go under, Chamber of Commerce, added: We have not been hit very hard” by the
nize that Montana and other mountain foreclosure signs go up and families “Businesses are still experiencing slow recession, he said. Housing prices in the
sales. I belong to several business net- city actually rose last year—only 0.4 per-
working groups, and they continue to rise cent, but that’s better than most housing
fedgazette
FEDERAL RESERVE BANK OF MINNEAPOLIS
in member numbers because people are markets. And at a time when commercial
Regional Business & Economics Newspaper
still really struggling. They are looking for real estate markets are reeling, “we’ve
any alternative to assist them with their got new construction downtown.”
ISSN 1045-3334
business.” In other words, Marquette just doesn’t
Subscriptions are available without charge. Back issues are available on EXECUTIVE EDITORS Arthur J. Rolnick The St. Cloud, Minn., region has fit the recession-woe profile that statistics
the Web. Articles may be reprinted if the source is credited and Public Affairs Terry J. Fitzgerald
is provided with copies. Permission to photocopy is unrestricted. Send cor- been publishing a quarterly survey of might suggest. “Marquette is kind of an
SENIOR EDITOR David Fettig
respondence to Public Affairs, Federal Reserve Bank of Minneapolis, 90 business conditions since 1998. The anomaly, not only in the U.P., but the
Hennepin Avenue, P.O. Box 291, Minneapolis, MN, 55480-0291; (612) EDITOR Ronald A. Wirtz
204-5255.
most striking part of this recession for entire state of Michigan,” said Kivela.
MANAGING EDITOR Jenni C. Schoppers
St. Cloud has been its breadth and Tom Nemacheck, head of the Upper
E-mail: letters@mpls.frb.org Tobias Madden
Internet: minneapolisfed.org
REGIONAL ECONOMIST
depth; across the board, economic indi- Peninsula Travel & Recreation
A S S O C I AT E E C O N O M I S T Rob Grunewald cators and industrial sectors were much Association, took that notion a step fur-
One of the Minneapolis Fed’s congressionally mandated responsibilities is
to gather information on the Ninth District economy. The fedgazette is
SENIOR WRITER Phil Davies weaker than in the 2001 recession, ther, at least from a tourism standpoint.
published bimonthly to share that information with the district, which S TA F F W R I T E R Joe Mahon according to Richard MacDonald, an “We’re pretty optimistic,” he said.
includes Montana, North and South Dakota, Minnesota, northwestern assistant professor of economics at St. “Except for a couple of pockets, I don’t
ART DIRECTOR Phil Swenson
Wisconsin and the Upper Peninsula of Michigan.
GRAPHIC DESIGNERS Rick Cucci Cloud State University (SCSU), which think the Upper Peninsula has been as
The opinions expressed in the fedgazette are expressly those of the authors Mark Shafer publishes the survey. “These survey hard hit as lower Michigan.”
or of attributed sources and are not intended to represent a formal position
of this bank or the Federal Reserve System. readings suggest a much darker mood There were a lot of doomsday predic-
of business leaders” regarding the cur- tions for tourism, Nemacheck said, but
rent recession, said MacDonald. they never really materialized in the U.P.
fedgazette RECESSION JULY 2010
Page 3

Change in unemployment rate, December 2007 to December 2009


Divide Renville Bottineau
15 Daniels Sheridan Burke Rolette Towner Cavalier Pembina Kittson Roseau
Glacier Lake
Lincoln Toole Liberty Hill of the
Williams Pierce Woods
Blaine Phillips Valley
Roosevelt Walsh 29 Marshall
Flathead Ramsey
Pondera Mountrail McHenry Koochiching
Benson
Ward Pennington
Grand
Nelson Forks Red Lake Beltrami Cook
Teton Chouteau Richland
Lake McKenzie McLean Eddy
Sanders Polk Clearwater
McCone Sheridan Wells Itasca St. Louis Lake
Foster Griggs Steele Traill Keweenaw
Missoula Dunn Mercer Norman Mahnomen
Lewis 15 Cascade Fergus Garfield Dawson
and Petroleum Golden
Clark Billings Oliver Hubbard Cass Houghton
Mineral Judith Basin Valley Burleigh Kidder
Prairie 94 Stutsman Barnes Cass Becker
Morton 94 Clay
Wibaux Stark Ontonagon
90
Powell Rosebud Crow Aitkin Carlton Baraga
Wadena
Meagher Musselshell Logan Wilkin Wing Gogebic
Wheatland Slope Hettinger La Moure Ransom Douglas Bayfield Marquette Luce
Granite Broadwater Golden Fallon Otter Tail Chippewa
Valley Treasure Grant Alger Schoolcraft
Emmons Richland 35 Iron Iron 75
Yellowstone Custer Sioux Mille Pine
Deer 94 Bowman Adams McIntosh Dickey Sargent Todd Ashland Dickinson
Ravalli Lacs Vilas Delta
Lodge Jefferson Gallatin Sweet Morrison Mackinac
Silver Douglas Kanabec Washburn
Grass Grant Burnett Sawyer Florence
Bow Stillwater Corson Campbell McPherson Marshall Traverse
Harding Benton Price Oneida
Roberts Stevens Pope
94 Stearns
Polk Forest Menominee
Carter Perkins Brown Big Isanti
Beaverhead Edmunds Sherburne Chisago
Rusk
Stone Barron
Park Big Horn Powder River Walworth Day Anoka Lincoln
15 Madison Swift Langlade
Carbon 90 Kandiyohi Wright Washington Taylor
Dewey 29
Grant
Potter Faulk Chippewa Meeker Hennepin Ramsey Chippewa
Lac qui
Yellowstone NP
25
Butte Spink
Codington
Parle Carver
St. Croix Dunn KEY
Ziebach Clark McLeod
Sully Deuel Yellow Medicine Renville Pierce Eau Claire
Hamlin Scott Dakota Pepin <0
Meade Hyde Hand Sibley
Beadle Lincoln Redwood Le Goodhue Buffalo
Hughes Kingsbury Brookings Lyon Nicollet 0–<1
Lawrence Haakon
Sueur Rice Wabasha Trempealeau
90
Stanley Brown
Buffalo Jerauld Sanborn Lake Pipestone Cottonwood Blue Waseca
35
1–<2
Pennington Jones Lyman Miner Moody Murray Olmsted Winona La Crosse
Watonwan Earth Steele Dodge
90
Brule Aurora
Custer
90 Hanson
McCook Minnehaha Rock Nobles 90 Jackson Martin Faribault Freeborn Mower 90 Fillmore Houston 2–<3
Jackson
Mellette Davison
Douglas 3–<4.7
Hutchinson Turner
Fall River Shannon Bennett Todd Tripp Gregory Charles Mix Lincoln
>4.7
Source: Bureau of Labor Statistics Bon Yankton
Homme
Clay
Union

Lodging revenue was up about 1 percent Larger district states—Minnesota and


Superiority complex current oil boom in North Dakota,
to 2 percent last year, whereas other Wisconsin—didn’t perform as well, yet An economics history buff might tell which has made the state an anomaly
regions nationwide saw tourism drop by they did outperform the nation. you that some of this performance even within the district (see sidebar on
as much as 15 percent to 20 percent. Changes in the number of people could have been predicted based on page 6). Perhaps the Midwest work ethic
Though the U.P. is often perceived as the with a job (so-called total nonfarm past experience. Since 1976, and cover- even plays a role—district states tend to
laggard, Nemacheck said, “in this case we employment) were less favorable in ing five separate recessions (including have a higher percentage of multiple
kept our head above water, and it feels some district states, particularly outside 1980 and 1981–82, which many lump job holders.
like the other places took a bigger hit.” the Dakotas (see Chart 2). And together), unemployment rates in dis- Farming also appears to have played
although the employment-population trict states generally have been less an important role in cushioning the
You should see ratio (the proportion of working-age volatile—the spread between their high- blow of the recession in western states
people with jobs) in all district states est and lowest unemployment rates dur- and greater Minnesota (see Chart 5 on
the other guy declined during the recession, it was still ing this period has been narrower than page 4). That was particularly the case
As it turns out, that “could’ve been worse” considerably higher last year than the in most states (see Chart 4 on page 4). early in the recession when commodity
theme runs through most of the Ninth national average (see Chart 3). Wisconsin and Michigan are the prices skyrocketed in 2008 and farm
District—not only from sources, but from Big deal? Maybe not before the reces- exceptions. Though only portions of income soared. Commodity prices and
reams of data. To get a better idea of com- sion, when such arcane comparisons each state are in the district, the U.P. farm income have since declined—dairy
parable performance from 2007 through were the purview of economists and pol- and northwestern Wisconsin represent and hog farmers, in particular, have seen
2009, the fedgazette analyzed employment icy wonks. But it’s a big deal now, an eastern bookend of counties with the tough times. But in general, agriculture
patterns across various geographic juris- because the recession has focused soci- highest unemployment rates and the has been stable enough to help prop up
dictions (states, counties, metro versus ety’s attention back on earned income, largest increase in joblessness in the local and regional economies, especially
rural) as well as other categorical frame- the lifeblood of mortgage and car pay- entire district (see maps). Wisconsin’s in counties where farming plays a pro-
works, such as industry sectors and ments, savings and discretionary spend- current rates, however, are well below portionately larger role (see Chart 6 on
against past recessions. ing upon which so many businesses rely. their post-1976 peak. page 5).
In general, Ninth District states fared And in district states, the ratio of people On the other end of the spectrum, Another factor appears to be the lack
relatively well against states nationwide in still earning a paycheck is considerably the Dakotas and Montana have had of any disproportionate blight from an
terms of total job losses and unemploy- higher than in the nation as a whole. much less volatility in their unemploy- industry and geographic standpoint.
ment rates. Though unemployment rates In a nutshell, unemployment rates ment rates since the mid-1970s. Their For example, industry sectors in the dis-
have grown considerably in the past two and employment-population ratios both current rates are running well below trict mostly outperformed their peers
years, they grew less than the national indicate that, at least in terms of peak levels and are among the lowest in nationwide. As a useful cross-check,
average in district states over the past two employment, district economies the country right now. fedgazette analysis also found that metro
years (see Chart 1). Just as important, entered the recession in better shape, There are likely many reasons for the and nonmetro areas in the district out-
unemployment rates in the district were lost a lower proportion of jobs and had district’s general lack of volatility in job- performed those across the nation (see
lower to begin with. In December 2009, a higher percentage of folks still lessness over the past three and a half Chart 7 on page 5)—mostly because
North Dakota and South Dakota had the employed. A triple winner—or at least a decades, including the region’s relative-
two lowest unemployment rates in the triple nonloser—which is pretty good ly well-educated workforce. Other fac- Continued on page 4
nation, with both still under 5 percent. under the circumstances. tors are unique and episodic—like the

C H A RT 1 C H A RT 2 C H A RT 3
Unemployment rates increased Nonfarm employment fell less Employment-population ratios
less in district states than U.S. in most district states remain higher than U.S. in district states
2 80
Decrease in
Percent change, Dec. 2007 to Dec. 2009

Increase in 1 employment-
10 unemployment 75 population ratio,
Dec. 2007
rate, Dec. 2007 to 0 to Dec. 2009
Dec. 2009
8 -1 70 Dec. 2009 2.8
Dec. 2007 2.9
5.0 2.0
-2
Percent

Percent

4.0
6 2.7 65 5.1
2.8 -3
4.6
4 -4 60 4.5
1.3 1.9
-5
2 55
-6
0 -7 50
U.S. Wisconsin Minnesota North South Montana U.S. Wisconsin Minnesota North South Montana U.S. Wisconsin Minnesota North South Montana
Dakota Dakota Dakota Dakota Dakota Dakota
Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics
fedgazette RECESSION JULY 2010
Page 4

Recession from page 3


people, the Twin Cities saw the smallest
metro/nonmetro performance among Among the nation’s 49 metro regions with at least 1 million unemployment increase (2.8 percent-
the district states was fairly uniform (see people, the Twin Cities saw the smallest unemployment increase age points) from January 2008 to
Chart 8). As they say, all for one and one January 2010, according to the U.S.
for all, at least for the Ninth District. (2.8 percentage points) from January 2008 to January 2010, Department of Labor. When it regis-
There are also historical considera- according to the U.S. Department of Labor. tered 7.7 percent in February, the Twin
tions: In fact, this recession looks much Cities became the only large metro to
like previous recessions, if on steroids. post a decrease (0.3 percent) over a year
For example, the job loss pattern in this cle by Patrick Barkey of the Bureau of Claire region has risen by almost 90 per- earlier.
recession is fairly typical of past reces- Business and Economic Research cent, but that’s deceiving. More notable still, the Twin Cities
sions: Minnesota and Wisconsin are big, (BBER) at the University of Montana. Unemployment stood at just 3.4 percent would be considered a laggard among
diverse economies that tend to move Once the fastest-growing region of the in 2007, and its 6.1 percent rate in 2009 district metros. Bismarck and Fargo,
with U.S. trends; total unemployment state, and subsequently one of its hottest is significantly lower than the state’s aver- N.D., along with Sioux Falls, S.D., boast
and its growth during this recession in housing markets, the greater Kalispell age. “We haven’t seen the big job losses” unemployment rates below 5 percent,
these two states reflect that link. region saw a collapse in housing and from major employers in the region, while Billings, Mont., and Rapid City,
At the other end, the Dakotas and real estate accompanied by a “seemingly McCoy said. “There have been no big S.D., are just a tick off that pace.
Montana are smaller and historically endless” series of bad news and reduc- dips. … We’re kind of just bumping Optimism tends to be contagious.
have tended not to follow the U.S. econ- tions in the wood products industry along.” Surveys of consumers and businesses in
omy as much because they are more across the northwestern corner of the He acknowledged that things aren’t Minnesota and Wisconsin—which
heavily tied to fluctuations in farm and state, according to Barkey. perfect—retail sales have been up and absorbed the biggest hits in this reces-
natural resource markets. As in the past, Flathead County saw housing starts down, and the banks are stable, “but sion among district states—suggest
this recession has been more muted in last year decline by 41 percent, and they all [got] a few houses back” more optimism than is generally found
the Dakotas. they are down 73 percent from their through foreclosure. The annual num- nationwide. For example, a fourth quar-
peak earlier in the decade, according ber of new homes went from about 100 ter 2009 survey by the Saint Paul Area
to BBER research. The drop-off has to only about 35 last year. But the area Chamber of Commerce found that hir-
Housing: No go boom hammered the local job market; by the also saw two new firms announce they ing expectations were positive, with 27
Another likely reason that the recession end of 2009, Flathead County’s unem- were coming to town—a software com- percent of members expecting to hire
has not been as deep in the district is a ployment rate had reached 10.9 per- pany planning to add 30 to 50 people, more workers compared with 9 percent
comparatively smaller decline in its cent, up from just 5.3 percent two years and the other a computer support firm expecting to lay off workers.
housing market. Make no mistake, the earlier. In contrast, rates in Gallatin planning to hire three times that num- Respondents were even more positive
housing boom paid a visit to the Ninth and Missoula counties—both of which ber. Local construction employment has about business prospects, with 58 per-
District, but it didn’t move in and have larger, more diversified been growing strongly in Eau Claire in cent expecting growth in 2010 com-
change the locks. And while the housing economies—were 6.5 percent or lower, early 2010, thanks to a new Luther pared with just 8 percent forecasting a
industry has experienced unrivaled even though housing starts had fallen Midelfort Mayo hospital and new Nestlé drop in business.
decline in some areas—like the Twin at a similar rate as in Flathead. manufacturing plant. Even manufacturing is upbeat.
Cities, which heavily influences Sources elsewhere cited the inverse— Despite the beating the sector took in
statewide housing trends in a lack of a housing frenzy—as a central Minnesota over the past two years—
Minnesota—the overall decline in the reason that many Ninth District regions
Is it gone yet? employment dropped by 15 percent—
Ninth District pales in comparison to were digging out of a smaller hole than None of this should minimize or ignore manufacturers see more sunshine in
the devastation and ongoing tumult in most. For example, the Eau Claire area the immense dislocation caused by the the forecast: According to a survey of
states like Florida, Nevada, Arizona and didn’t experience a big run-up in land recession, or give the impression that 500 manufacturing firms by Enterprise
California. and housing prices like other regions the economy has regained its rose tint. Minnesota, 34 percent of executives
Some regions have suffered a hous- did—much to the chagrin of area resi- It cannot be overstated that district expected profits to increase, while 17
ing double whammy from the collapse dents at the time. states have a long way to go to get back percent were bracing for a drop in
in construction and real estate, as well as “We were discouraged when hous- to prerecession normal. Forecasters pre- profits—a virtual flip-flop from one
the wood products industry that sup- ing and land prices were really going dict that it could take several years for year ago.
plies housing materials. This is how the up everywhere” except Eau Claire, unemployment rates to come down. Manufacturing in the west-central
western edge of Montana got clobbered. said McCoy, from the local chamber. Asked this past spring by a St. Paul part of Minnesota “is picking up again,
From 2002 to 2007, Montana home But that’s turned out to be a blessing reporter whether the recession was over, and some of our local manufacturers
price appreciation easily outstripped in disguise. McCoy credited that lack Dan McElroy, commissioner of the are actually in growth mode with new
other district states and the national of a boom for the region’s tentative Minnesota Department of Employment divisions,” according to Coni McKay,
average (see Chart 9 on page 6). optimism now. “We didn’t crash like and Economic Development, replied, executive director of the Alexandria
The city of Kalispell and its home everywhere else. … [Housing prices] “Only to an economist.” Lakes Area Chamber of Commerce, via
county of Flathead in western Montana went down a little, but they are com- But signs of comparative health are e-mail. The region’s tourism and retail
was the “epicenter of the recession in ing back now.” hard to ignore. Among the nation’s 49 business also have been good. “I can't
Montana,” according to a research arti- The unemployment rate in the Eau metro regions with at least 1 million speak for everyone here in the

C H A RT 4 C H A RT 5
District states fare better historically Large farm sectors led
State unemployment rates: high, low and current Jan. 1976 to Dec. 2009 to lower job losses
20 8
Percentage point
18 increase in
7
unemployment
16 District states Dec. 2009 rate rates, Dec. 2007
6 to Dec. 2009
14
Jan. Farm jobs as
12 1983 5 percent of all
2007 jobs
Percent

Percent

Dec. Feb.
10 1982 1983
4
Jan. Feb.
8 1983 1983 3
6
2
4

2 May
Feb. Jan. Mar. Dec.
1
1999 2007
1999 2000 1997
0 0
U.S. Wisconsin Minnesota North South Montana
Dakota Dakota
Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics


fedgazette RECESSION JULY 2010
Page 5

Alexandria Lakes Area, but I believe the sumers for that matter—to take a ‘hun-
outlook here is positive and optimistic.” During the recession and the fragile recovery, businesses have ker down’ attitude.”
King Banaian, chair of the economics discovered their resiliency, becoming more productive and finding
department at St. Cloud State, and co- An ode to flyover
author with MacDonald of the regional out along the way that maybe they don’t need so many workers.
quarterly business report, noted via e-
country
As a result, many are taking a cautious approach to hiring.
mail that the mood of local business Whatever the trepidation about
leaders is “always more positive in the prospects for recovery, that anxiety is
beginning of a year. But this year they District farming counties likely more acute elsewhere, because
C H A RT 6
are more positive than usual.” resisted worst of recession most other places are trying to climb
Even investment sentiment around Change in unemployment rates vs. farm employment concentration out of a deeper hole.
20
publicly traded firms in the district is Some district businesses see opportu-
beating national benchmarks. The Percentage point change in unemployment rates, nity because they made shrewd moves
15
Federal Reserve Bank of Minneapolis during the recession and maybe had
created a stock index of 27 mid-cap some good fortune along the way.
Dec. 2007 to Dec. 2009

companies in 2004, and for several years 10 Scheel has been in the sporting goods
the index tracked the S&P MidCap 400 business for almost four decades and
very closely. But the two indexes parted 5 has watched his company rebound from
ways beginning in 2008, and the local previous recessions. “Periods such as
one saw a much shorter and briefer 0 this are the perfect time to separate
retreat through the heart of the reces- your business from the competition,” he
sion (see Chart 10 on page 6). -5 said. “The best in each industry or cate-
0 10 20 30 40 50 60
Farm employment as a percent of total employment (2007) gory seem to do well and come out of
the recessions even stronger. Mediocre
The way we were? Source: Bureau of Labor Statistics and Bureau of Economic Analysis

or poorly run businesses struggle.”


But don’t mistake optimism for over- and finding out along the way that out process improves economic health, While many retailers cut inventories
confidence, at least not yet. For most maybe they don’t need so many work- but often casts aside workers with skills and salaries, Scheels took advantage of
sources, the mood is guarded, much ers. As a result, many are taking a cau- that might not transfer to new opportu- low interest rates and construction costs
like the day after a serious storm: Folks tious approach to hiring, according to nities in a changed marketplace. to expand retail space and grow his
are happy to see daylight, but there is Minneapolis Fed business contacts. “I can’t make the machinist who company’s labor force—including at the
some serious cleanup ahead before SCSU’s MacDonald has been hear- worked at the now-closed plant into a corporate headquarters in Fargo—each
things get back to normal. Said McKay, ing similar stories in St. Cloud bio-scientist. I have to lure bio-scientists of the last three years.
“While we all would love to believe the through the quarterly survey. Firms to this area and find a way for the Scheels has benefited from a con-
recession is over, we all know that it will are rethinking their workforce size, machinist to move to a job elsewhere,” centration of retail outlets along
take three to five years for our overall average hours and wages “in ways that said Banaian. “That just doesn’t always Interstate 29 from Grand Forks, N.D.,
economic vibrancy in the state or go beyond a pure cyclical adjustment. work well.” to Omaha, Neb.—all located in states
nation to return.” … [T]hey are emerging from this Upheaval in Washington, D.C., has least affected by the recession. But the
In spite of outward optimism, busi- downturn as leaner [and] more effi- also made businesses cautious, sources company is not immune to mistakes.
nesses and consumers understand that cient.” According to MacDonald, one said. McCoy, from Eau Claire, said that For example, as mentioned earlier,
economic forecasts call for modest executive with a large regional firm firms have expressed interest in hir- the company opened the largest all-
growth in the immediate future and “says that his business will never again ing, but are reluctant to do so sporting-goods store in the United
weak increases in employment—creat- be the same. … Demand for his firm’s “because they don’t know what’s going States—300,000 square feet—in Reno,
ing a self-reinforcing mechanism. Dick product would have to expand by an to happen in Washington” with health Nev., in 2008. “Great timing,” Scheel
Granchalek, president of the La Crosse order of magnitude in order for him insurance, tax rates and other federal noted sarcastically. The Reno store is
(Wis.) Area Chamber of Commerce, to increase the scale of employment to policies that affect business. “People the only one “that is not performing
sees area businesses taking a “wait and what it once was.” here are a little more cautious,” close to the level we would like. …
see” attitude. “What we’re seeing is The sheer scale of worker disloca- McCoy said. “I don’t think anyone’s Nevada is an economic mess by every
many people being cautious and hold- tion brings additional obstacles to a wanting to go springboard” headlong measure, and the attitude in Reno and
ing back,” even if they have the quick recovery in employment. “The into the recovery. Nevada is poor. You can feel the defeat
resources to expand and hire,” he said. problem is that recessions are wrench- Tim Hennessy, the regional president in the media every day.”
“They are saving for a rainy day and ing experiences that leave behind some for U.S. Bank in western North Dakota, In other places, resiliency and opti-
waiting for a clearer future.” collateral damage,” said SCSU’s said via e-mail that clients tell him that mism likely flow from being battle test-
The good and bad news is that dur- Banaian. For example, recessions shake “the uncertainty in the financial mar- ed—further testimony to the idea that if
ing the recession and the fragile recov- out businesses and entire industries kets, and especially the uncertainty of something doesn’t kill you, it just might
ery, businesses have discovered their that were inefficient or did not have a what to expect out of Washington, has make you stronger. That’s the feeling
resiliency, becoming more productive comparative advantage. This weeding caused many businesses—and con- Continued on page 6

C H A RT 7
Not just farming—District unemployment C H A RT 8 Metro and nonmetro unemployment
increased less in both metro and nonmetro areas increases vary across states
Unemployment rate, metro and nonmetro areas, Dec. 2007 and Dec. 2009
10 10
Increase in
unemployment
rate, Dec. 2007
8 8 to Dec. 2009
4.7 4.2
4.9
Dec. 2007 1.9
6 2.3 Increase in 6 2.9
unemployment 2.6
Percent
Percent

2.5 rate, Dec. 2007 2.9


to Dec. 2009 2.3
4 Dec. 2007 4 1.0
1.7
1.2 2.3

2 2

0 0
Metro Nonmetro Metro Nonmetro Wisconsin Minnesota North South Montana Wisconsin Minnesota North South Montana
United States Ninth District Dakota Dakota Dakota Dakota
Metro Nonmetro
Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics
fedgazette RECESSION
Page 6
JULY 2010

C H A RT 9 Housing price boom and bust C H A RT 10


District stocks performed better than the nation
missed much of the district Mid-cap stock price indexes (Jan. 2004=100)
Statewide housing value index, FHFA purchase-only transactions (1st Qtr 2000 =100)
190 200

180
Montana 175
170 Ninth District Mid-Cap Index
United States
160 150

150
Minnesota 125
140 S&P 500 S&P MidCap 400

130 100
South Dakota Wisconsin
120
75
110
North Dakota
100 50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009

Source: Federal Housing Finance Agency Source: Federal Reserve Bank of Minneapolis, Standard & Poors

Recession from page 5 “That was a community of 10,000 peo- from the state of Michigan to open a cop- “we are seeing and hearing many posi-
ple basically gone.” per and nickel mine about a half-hour tives from business.”
for many in the Marquette region in the So you might understand the Yooper from Marquette. Though fiercely Nemacheck, from the U.P. tourism
Upper Peninsula. In 1995, while the rest optimism coming out of this recession, opposed by some, others welcome the group, said he keeps in touch with many
of the country boomed, the greater despite what the jobless rate might imply. hundreds of construction and mining bankers, and has a couple of them on his
Marquette region had to endure the For one thing, the region is seeing a mini jobs that are projected to follow. board. “They’re saying things aren’t that
closing of the K.I. Sawyer Air Force revival in mining. Cliffs Natural Resources Clickner said she’s not convinced bad, and there’s a feel of a bounce, as gen-
Base. That was “a crisis far worse in our announced major investments in local that Marquette is out of the economic tle as it is,” he said during an April inter-
community than [this] recession,” said iron ore mines in mid-2008 that will keep woods yet, because trends tend to lag in view. In terms of tourism, “every indica-
Amy Clickner, CEO of the Lake them running much longer than thought the U.P., and Michigan’s state budget tion is that the [tourism] traffic is starting
Superior Community Partnership, a just a few years earlier. A subsidiary of Rio crisis will hurt given the large govern- to look pretty good. … We’re feeling good
regional economic development group. Tinto received approval earlier this year ment sector in the county. Still, she said, about the upcoming summer.” f

North Dakota:
The little economic
engine that could

By RONALD A. WIRTZ
Editor

W
hat a difference a decade has bowl of cherry pits. While North Dakota $23,500, it was about 83 percent of the outgoing economic tide. While job loss
made for North Dakota. hasn’t escaped the national recession national average, according to the fed- has been rampant across the United
Roughly that long ago, the completely unscathed, in the big picture eral Bureau of Economic Analysis. States and the Ninth District, North
national media were coming to the state it has posted top-of-the-class numbers in Over the next 10 years, annual person- Dakota actually added jobs from 2007
to throw dirt on it, curious about what unemployment, income growth and al income grew by 5.3 percent—two full through the end of 2009 (see Chart 2 on
was going on in a state whose popula- other enviable economic categories. percentage points better than the nation- page 3). With 4.9 percent unemploy-
tion barely grew during the roaring Many point to the oil boom that has al average. By 2009, personal income in ment in March (seasonally unadjusted),
1990s. The following decade didn’t start gushed money, business and general opti- the Peace Garden state had leapt to North Dakota had easily the lowest
much better: Through the first half, it mism into the state. But sources say the $39,500—slightly above the national unemployment rate in the country—a
was one of only two states to lose popu- state’s success goes deeper than an oil well. average and good for 19th highest. fraction of the nation’s rate of 9.7 per-
lation—the other being Louisiana, For much of the decade, that growth cent and well ahead of second-place
which had Hurricane Katrina to blame. went overlooked—indeed, dismissed— South Dakota (5.3 percent).
Fast-forward to 2010, and there’s now
Nice view from here as the rest of the country strolled along Without doubt, there are still strug-
a bit of reverse Julius Caesar going on: The state’s repositioning on the eco- with the housing boom. But when the gles in North Dakota. Some rural areas
People come not to bury North Dakota, nomic totem pole is dramatic. A decade country fell into recession, North continue to lose population, and many
but to praise it. That’s because the state’s ago, the state’s per capita personal Dakota gained more attention for its small towns are caught in an economic
economy sticks out like a diamond in a income ranked 39th in the country; at ability to continue swimming against an death spiral—few economic opportuni-
fedgazette RECESSION
Page 7
JULY 2010

ties, forcing young workers and families


to look elsewhere—with no obvious PERCENT CHANGE IN NONFARM EMPLOYMENT BY INDUSTRY*
means of reversing the trend. But North Dec. 2007 to Dec. 2009
Dakota is hardly unique in that regard.
Nor has the state been completely Professional Information Mining,
Total Trade, Education and Leisure and Logging
immune to the recession’s effects. The Nonfarm Transportation and Health Business and Financial and
state’s manufacturing base has been hit Employment and Utilities Government Services Services Manufacturing Hospitality Activities Construction
hard with major manufacturers laying
Minnesota -5.4 -7.9 .4 4.8 -6.5 -14.7 -5.4 -5.1 -24.8
off hundreds; Bobcat, the homegrown
maker of skid-steer loaders, closed its Montana -5.5 -5.3 1.1 3.9 -7.8 -15.2 -4.6 -4.1 -29.1
Bismarck plant because of the national North Dakota 1.2 0.3 2.9 4.9 -3.0 -11.1 3.6 1.5 5.6
and international downturn. In all, the South Dakota -2.0 -1.0 2.2 5.6 -7.9 -11.7 -1.6 -4.7 -11.5
state lost 11 percent of its manufactur- Wisconsin -6.5 -7.8 2.1 4.2 -12.7 -16.0 -5.5 -4.5 -22.3
ing job base from 2007 through 2009, as U.S. -6.1 -7.7 0.5 4.3 -8.7 -16.0 -4.0 -7.5 -22.6
well as 3 percent of jobs in professional
and business services. *Industries are sorted by U.S. employment size
But that’s where many economic simi- Source: Bureau of Labor Statistics
larities end as far as national and most
state trends go. In four other major
industrial categories—trade and trans- spillover effects of oil production on the Solberg credited Fargo’s economic Scandinavians never claim to look good
portation; leisure and hospitality; infor- broader state economy. good fortune to the stabilizing presence or [to be] doing really well. It’s got
mation and financial activities; and min- “The oil-gas-coal patch certainly of three colleges, Great Plains Software something to do with knowing or being
ing, logging and construction—North deserves a bunch of credit. It’s filling (owned by Microsoft), high health care related to farmers … [who] almost
Dakota achieved net job increases over pockets, restaurants and hotel rooms all employment and the headquarters of never talk positively about their crops
the past two years. No other district state over the western part of the state,” said Scheels, a major purveyor of high-end because they think it’s bad luck.”
saw a net increase in any of these cate- Carley. He pointed out that North sporting goods. But Solberg also In other words, many North
gories (see the accompanying table). Dakota was the only state to see an acknowledged that these economic ele- Dakotans seem to understand that they
Even in manufacturing and professional increase in hotel rates and occupancy ments are hardly unique to Fargo. One are doing comparatively well, but also
and business services, losses in North last year, and oil and other energy pro- factor for Fargo and the entire state is that things can change in a hurry—just
Dakota were the lowest of any district duction “is a large part of that.” likely “the housing market never [get- as “a good hailstorm or tornado can
state and well below the national average. Richard Rathge, director of the North ting] out of whack here.” Solberg said wipe out a crop in minutes,” said Carley.
Dakota State Data Center, noted via e- his bank has branches in Minneapolis, “I think that everyone here is aware that
Fuel for the North mail that the oil exported out of the “and we see the pain that goes on where we’re better off than many others, but
region brings an even more important housing falls off a cliff.” they don’t say much about it. It’s like
Dakota fire import: people. The state had been see- Jerry Youngberg is a real estate agent being the tallest kid in a short class.”
There are both obvious and subtle rea- ing population loss virtually everywhere with Dakota Commercial & Develop- At times the North Dakota vibe can
sons for this success. Most people, for except Fargo and Bismarck. But oil pro- ment in Grand Forks, and has been in border on fatalistic. Said one source at
example, are quick to credit the shale duction has reversed that: According to the real estate business for 26 years. He the University of North Dakota: “I think
oil boom in the western part of the Rathge, 20 of 53 counties saw population believes real estate sales “are a pretty we are almost at a point of suspicion that
state—the so-called Bakken play. growth last year, and 15 of those were in good indicator of the economic health others will try to emulate North Dakota
Though oil prices have been up and the western part of the state. Rathge, the of an area.” The Grand Forks multiple and rob us of what made us successful.”
down a lot over the past two years (see state’s demographer for more than 25 listing service, which covers much of Economic performance, it seems, is a
the September 2009 fedgazette and a years, said that “this is one of the very northeastern North Dakota and north- matter of perspective. North Dakota
Web-exclusive June update), the oil-pro- few times I can recall that the vast major- western Minnesota, had its best years in might look like the king of the hill right
ducing portion of the state has been surg- ity of growing counties are on or west of 2006 and 2007, like the rest of the coun- now, but that position is like the adage
ing with the rebound in crude prices. Last the Missouri [River].” try, according to Youngberg. But 2008 about a sunny day in these parts—enjoy
year, the state pumped 80 million barrels But the state’s enviable economic was the third-best year on record—until it, but don’t be surprised when the
of oil—up almost 25 percent from 2008. position is not just about oil and mining, 2009 beat it, and the outlook for this clouds roll in. Schlossman pointed out
Since 2004, crude oil production in the Rathge and others pointed out. year is more of the same. that the state’s lack of boom or bust
state has grown an average of 17 percent Agriculture, for example, has been cycles makes for smaller recessions, “but
per year. The state is now the fourth- healthy for the past half-decade, particu- Outlook: A slice of soon you will see our job growth lag” as
largest oil producer in the United States, larly in crop sectors where the state is the rest of the country rebounds and
behind only Alaska, Texas and California. strong, and has helped stabilize local
humble pie returns to historical growth patterns.
The success and impact of the oil economies in North Dakota and across When it comes to the state’s good for- “The comparative prosperity we may
industry shows immediately in employ- the Ninth District (see cover article for tune, current economic conditions and enjoy today is only relative.”
ment data (see “Mining, Logging & more discussion). the road ahead, most sources across the It’s hard to imagine things in North
Construction” in the table). Because this Stark County lies in an oil-producing state exhibit a farmer’s mindset—modest, Dakota unraveling too much, particular-
category includes construction jobs, region. While oil drilling and produc- perpetually optimistic, yet conservative. ly in the short term, though a large and
most states saw numbers plunge—even tion bring additional economic activity Brad Schlossman, CEO of West Acres extended drop in oil prices would likely
more than in manufacturing—because to the county, “ag is the historical Shopping Center in Fargo, for example, cause anxiety. But issues of real econom-
of the collapse in housing. But not bedrock,” according to Vaune Cripe, said that “our agricultural-based culture ic concern elsewhere—like a serious
North Dakota, which saw sector employ- senior vice president of American Bank keeps us aware that next year’s crop has downturn in commercial real estate and
ment rise by 5.6 percent on the heels of Center in Dickinson, the county seat. yet to be harvested.” yawning state budget deficits—are non-
strong growth in the oil patch, a healthy “The energy industry has been a thick And Youngberg, from Grand Forks, issues in North Dakota. And if North
coal market (the state is the nation’s frosting on the cake.” added, “Our conservative nature Dakota does see its fortunes turn for the
10th-largest producer of coal) and a Michael Solberg, president of State inhibits us from tooting our own horn worse, one doesn’t get the impression
more stable housing market. Bank & Trust in Fargo, agreed that the very loudly. But we are working on over- that there will be a lot of related angst.
Cole Carley is about as far from the state’s success “is more than oil.” Despite coming that to some degree.” Solberg points to “a steady mind
oil patch as a North Dakotan can get as having no oil production to speak of, the Carley, from the Fargo-Moorhead frame” among residents when it comes
the president and CEO of the Fargo- Fargo region’s unemployment rate was Convention & Visitors Bureau, was to economic difficulties. “There is a
Moorhead Convention & Visitors lower than the state average (that’s also asked about North Dakota’s silver quiet confidence. Our region knows
Bureau. Despite being on the opposite the case in Bismarck and Grand Forks, spoon, and he replied, “People up here when times are tough, we’re going to do
side of the state, Carley understands the the state’s other two metro areas). would never use that slogan because better than most.” f
fedgazette N I N T H D I S T R I C T F E AT U R E JULY
Page 8
2010

Sing sweetly (please), employment canary


Survey of staffing firms suggests some—slow—recovery in the jobs market

By RONALD A. WIRTZ veyed staffing services firms in


Editor Minnesota, North Dakota and Wisconsin CHART 2 Temp requests up across sectors
to see how their businesses were faring
Survey question: Compared with last year, what’s happened
coming out of the recession, what trends to the volume of staffing requests?
Before the recession, employment
could be gleaned from recent activity Percent
growth was not a matter many paid par-
and what the future holds for the tradi- 80
ticularly close attention to. But with
tional employment market.
deep, scarring job losses across the
The survey suggests both positive and 70
country, job growth has become a close-
not-so-positive news. Staffing services
ly watched, slow-motion race.
firms report that their business is pick-
Through the first half of this year, 60
ing up—aggressively in some cases.
employment levels appear to have at
Business has been up across most sec-
least found stable ground again. Some 50
tors in the economy served by these
increases in employment are forecast
firms. The unpleasant news is that with
through the remainder of this year and
an ample supply of available workers, 40
into next year. (See the most recent
client firms are picky about whom they
forecast from the Federal Reserve Bank
choose to accept for temporary work, 30
of Minneapolis on page 21.)
and pay rates generally have been flat,
Many policymakers, unemployed
or worse. As for prospects for growth in
workers and others look to the tempo- 20
traditional employment in the near
rary employment market (also referred
term, opinions vary widely.
to by the industry as staffing services) as 10
a leading indicator for traditional
employment. Said one official with a
Tweet, tweet
0
Minnesota staffing company, which The good news, especially if you’re in Industrial Office- Health Care Professional- Technical Information
operates six offices in Minnesota and the staffing services sector, is that busi- Number of Clerical Managerial Technology
Wisconsin, “We are the first to start the ness is looking up—way up for some. Respondents 36 34 23 32 34 28
recovery” as business and industry get Among 42 responding firms, those see- ■ Increase ■ Same ■ Decrease
more comfortable with permanent hir- ing a year-to-date increase in clients over
Source: Federal Reserve Bank of Minneapolis survey of temporary employment
ing. Many firms “are unwilling to add the same period last year outnumbered firms in Minnesota, North Dakota and Wisconsin
[jobs] until they are more assured of all other responses by a 3-to-1 margin
long-term recovery. We are the way (in) (see Chart 1); close to half of respon-
to work and have been for the last 10 dents said client volumes grew by at least majority of firms saw an increase in the ically larger (5 percent of more).
years.” 10 percent. number of workers placed with clients An ample labor supply also gives
So with the help of statewide associa- More clients generally mean more (see Chart 1), and close to half said total clients the pick of the litter so to speak,
tions in three states, the fedgazette sur- contract workers: As a group, a large assigned workers grew by 10 percent or and they are being choosier; respon-
more. This finding also matches govern- dents reported that client companies
ment data that suggest—after a steep were asking for more educated, skilled
CHART 1 More temp workers sought, placed decline—that temporary and contract and experienced workers. Worker stan-
Survey question: What’s happened to business employment may be on the rebound in dards, said one Wisconsin firm, “are
this year compared with the same period last year? three district states. much higher by the employer. [Clients]
Percent Those gains were spread fairly evenly want more employee for less money.”
80 among the employment sectors served One might think a tough employ-
by temporary staffing firms. Respondents ment market would make job hunters
70 reported net gains in staffing requests in more pliant and eager to please. But
every area of temporary employment, job-related expectations range widely
60 led by the industrial sector (see Chart 2). among temporary or contract workers.
Though more openings appear avail- Some workers are very cooperative and
50 able, not everything is bright for work- eager, staffing firms reported. One
ers. It probably comes as no surprise, Wisconsin company said, “There has
40 but respondents said the supply of virtu- definitely been an increase to not only
ally all types of workers had risen, accept temporary assignments, but
30 including those with higher skills. there has also been an increase in our
That appears to have affected pay assignment retention. The employee
20 rates, as slightly more staffing firms pool is less likely to walk off or quit a job
reported a net decline (rather than an than they previously had been.”
10 increase) in pay rates over the same But other firms reported that some
period last year. A medium-sized staffing workers remained demanding. A differ-
0 agency in Wisconsin commented that ent Wisconsin agency said, “We are
Number of clients Number of workers
placing job orders placed
office and administrative professionals amazed at how many unemployed appli-
used to earn between $12 and $14 per cants will not budge on shift or wage, as
■ Increased ■ Decreased hour, but “now, $10 with no flex.” if the economy was robust.”
Source: Federal Reserve Bank of Minneapolis survey of temporary Reported increases in pay rates were typ- There’s some evidence that extended
employment firms in Minnesota, North Dakota and Wisconsin ically small; reported decreases were typ- unemployment benefits have made low-
fedgazette N I N T H D I S T R I C T F E AT U R E JULY
Page 9
2010

wage workers choosy. When unemploy- intermediate future. Here the news is my, and also because clients are trying about 400 contacts identified by these
ment checks rival what economists call mixed; indeed, it might be more accu- to avoid health care and other rising three organizations. The e-mail
the reservation wage—the lowest wage rate to say it’s on hold. labor costs by sticking with contract informed members about the survey,
that a worker will accept to take a For example, staffing firms overall workers. Another firm in that state was its intent and where it could be taken
job—finding employment can seem reported a slight increase in the ratio seeing more companies use workers “on online. The sur vey was conducted
less urgent. A medium-sized staffing of assignments becoming permanent a per-project basis and utilizing tempo- from April 21 through April 30. A total
agency in North Dakota reported that compared with the previous year. A rary staffing to remain flexible” in an of 42 responses were received. The
entry-level temporary or seasonal posi- small placement firm in the Twin unstable economy. three organizations have a combined
tions were a “challenge” to fill because Cities said it “sees an upward trend— One staffing company in the Twin membership of 121, but their contact
job and unemployment income were very slow, but upward” for the tradi- Cities reported that business was up lists included nonmember firms as well
similar. A medium-sized agency in the tional employment market. 200 percent over the same period a as multiple contacts at a single firm.
Twin Cities commented, “We do see a However, despite the pickup in their year earlier. “We’ve started to see some
lot of people that just want to say they own business, staffing companies said permanent business for higher-level
are applying for a job, but they really their clients are still taking a wait-and- positions happening. I do feel that
do not want it. They just want to collect see approach to full-time permanent there won’t be a great improvement in
their unemployment.” hiring, preferring to stay as lean and permanent placements until next year
And a third agency serving a small flexible as possible by depending on providing the economy doesn’t stall
market in Wisconsin said that “workers temporary and contract workers for out. Many of our customers have said
are more selective in accepting positions long periods. According to one large that they intend to keep people on as
if they are receiving [unemployment] ben- Wisconsin staffing firm located in a temporaries for longer terms than they
efits.” major metro region, “Customers are used to.” f
looking for long-term employees, but
making few commitments to hiring the Methodology: This survey was conducted
A traditional outlook employees.” with the assistance of the Minnesota
Many economy watchers are interested That’s good news for staffing firms, Recruiting & Staffing Association, the
in what trends in temporary and con- and many anticipate continued growth. North Dakota Staffing Association and
tract employment might mean for per- A Wisconsin firm said it sees healthy the Wisconsin Association of Staffing
manent employment in the near and business ahead in an improving econo- Services. An e-mail alert was sent to

Short sales stand tall


More sellers—and mortgage holders—of “underwater” homes
are taking what they can get

By JOE MAHON Short sales have become an increasingly short sales have caught on. Although sells it to cover remaining debt.
Staff Writer popular escape hatch for financially dis- they can be complicated and time con- For short sales to occur, it takes two
tressed homeowners who need to sell in suming, in a down market, short sales needy parties to tango, and banks aren’t
When one of Blaise Johnson’s clients fell a still-hurting housing market. often work to the advantage of all par- accustomed to accepting losses on their
behind on his mortgage last year, things Market survey data indicate that, ties—seller, buyer and lender. loans. Just a few years ago, most short-
looked dire. The Fargo, N.D., home- nationwide and in the Ninth District, But the surge in short-sale activity is sale offers (about 90 percent, according
owner needed to sell, but in a real estate short sales are growing, although the unlikely to last for more than a year or to Wahlberg) were rejected. Lenders
slump, his house was worth less than the rate of growth varies, typically in sync two. Short sales will likely decline when usually preferred to foreclose, resorting
amount he still owed the bank. If it had with the underlying health of a region’s housing prices rebound, allowing home to short sales only in instances where
gone into foreclosure, he not only housing market. sellers to once again pay off the bank on they had little hope of recovering the
would have lost his home, but he also In March, roughly one in 10 homes closing day. value of the home, typically due to fire,
would have had difficulty buying anoth- sold in the Twin Cities metro area was a flood or some other disaster.
er for years to come because of a poor short sale, according to the Minneapolis All that has changed with the drop in
credit record. Area Association of Realtors (MAAR); in
Treading water housing values in many parts of the
In the end, the client staved off fore- 2006, that statistic was closer to one in Until recently, real estate short sales country and the district. The number of
closure, thereby doing less damage to his 100. (not to be confused with short selling in “underwater” homes—those whose own-
credit standing. Johnson, director of lend- Data on short sales aren’t available the stock market) were rare. “I couldn’t ers owe more on their mortgage than
ing for Gate City Bank in Fargo, worked for many smaller markets in the district, even spell short sale three years ago,” the market value of their house—has
out a deal in which the homeowner sold but interviews with real estate sources said Bill Malkasian, president of the risen sharply over the past three years.
his house for what he could get and suggest that they’ve become more preva- Wisconsin Realtors Association. Foreclosures and tighter appraisal stan-
agreed to make up the $3,000 shortfall— lent. “We’ve seen a lot of activity with There isn’t much opportunity to sell dards in the secondary mortgage market
the difference between the sale price and short sales, and a lot of interest from a home short when prices are rising, as have further lowered home values in
the balance owed on the mortgage—out first-time home buyers,” said Brint they were over much of the past 15 years many areas, driving more properties
of his own pocket. Wahlberg, a real estate broker in in virtually every district market. For a underwater.
This transaction is a simple example Missoula, Mont. homeowner struggling to make mort- In the first quarter of this year, about
of a short sale, in which the homeowner Given the state of the housing mar- gage payments, the standard solution in 17 percent of Minnesota homes with a
sells for less than the mortgage amount, ket—sagging values and large invento- a robust market is foreclosure, where mortgage outstanding had negative
often making some arrangement to pay ries of foreclosed homes in many parts the lender takes possession of the home equity, according to a report by research
all or part of the outstanding balance. of the district—it’s not surprising that (which has typically appreciated) and firm CoreLogic. Even in relatively pros-
Continued on page 10
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2010

Short sales from page 9

perous North Dakota, 11 percent of Multiple Listing Service (MLS) data CHART 2 Short sales account for a larger portion
mortgages were underwater, or close to compiled by MAAR. of national and district home sales
it (see Chart 1). As short sales have increased to Real estate transactions by type, July 2009 vs. April 2010
account for over 10 percent of all home
Percent of sales
Coming up short sales in the Twin Cities, foreclosures
100
have declined. From early 2009 to early
In this troubled market, short sales
2010, “lender-owned” sales fell 38 per-
have gained traction as an alternative to 90
cent in the metro area. MLS data are
foreclosure. In the nation and in the dis-
less informative for other metro areas in
trict, short sales have increased in num- 80
the district. Several realty associations,
bers and as a proportion of both total
including those in western Montana,
housing sales and distressed sales (those 70
South Dakota and northwestern
where the owner is compelled to sell).
Wisconsin, didn’t begin tracking short
Nationwide, short sales grew from less 60
sales until 2009, in response to signs that
than 13 percent of total transactions last
activity was increasing.
July to 18 percent in April, according to a 50
But real estate sources provide fur-
survey conducted by Campbell
ther evidence of an increase in short
Communications for the trade publica- 40
sales. In Sioux Falls, S.D., First Dakota
tion Inside Mortgage Finance. Short sales’
Title handles the details of housing
share of distressed transactions increased 30
transactions around the state, including
even more over the same period, from 25
payments to mortgage holders. Vice
percent to 38 percent (see Chart 2). 20
President of Business Development
In the district, where the housing
Mark Wahlstrom said he’s seen more
crash hasn’t been as severe, short sales 10
short sales over the past 12 to 18 months
make up a smaller proportion of total
than over the past decade.
sales. But short selling has increased 0
dramatically over the past year. The July 2009 April 2010 July 2009 April 2010
Inside Mortgage Finance survey found that Lemonade from lemons United States Ninth District
in district states (excluding portions of In many ways, short sales are advanta- ■ Nondistressed ■ Short sale ■ Foreclosure
Michigan and Wisconsin within the dis- geous—or at least the lesser evil—for
trict), short sales increased from 9 per- everybody involved in the sale of a home Source: Campbell Surveys for Inside Mortgage Finance Publications, Inc.
cent of transactions last summer to 16 whose value has been battered by the
percent in April. District short sales as a market.
share of distressed sales increased even For the lender, short sales offer a way pursuing foreclosure. Also, holding illiq- pay off. This can complicate and drag
more over the same period and out- to avoid the often costly and lengthy uid assets on the books looks bad to out a potential short sale, making it less
paced national gains. process of taking possession of a house investors and may imperil a bank’s attractive to both seller and buyer. “It
The Twin Cities saw a big jump in and trying to sell it in a slow market. By standing with regulators. isn’t always the best process, and people
short sales in 2009, and that trend con- agreeing to negotiate with the owner— For homeowners who are looking to do get frustrated,” said South Dakota’s
tinued this spring, although at a slower in many cases accepting less than the get out from under a mortgage, taking Wahlstrom.
pace. As of March, the number of short full value of the mortgage—a bank or what they can get in the market can be
sales in the Twin Cities area had risen 52 secondary mortgage holder may recover preferable to letting their home slip The new normal?
percent from a year earlier, according to more of its investment than it would by into foreclosure. While selling short
blemishes the homeowner’s credit Short sales are a lagging indicator of the
record, the credit damage often is less downturn in the housing market rather
CHART 1 Large share of homes are“underwater” severe compared with foreclosure. (The than a new trend in home financing.
Percent of properties with an outstanding mortgage extent to which a short sale impairs a The short-sale tide may continue to rise
that have negative equity or within 5 percent homeowner’s credit depends on several for a while; respondents to the April
First quarter 2010* Inside Mortgage Finance survey indicat-
factors—previous credit history,
whether the mortgage is delinquent, ed that the supply of district homes on
35 the market listed as short sales was grow-
how many payments have been missed
and so on.) ing faster than stocks of foreclosed
30 “The credit implications of a short properties and traditional, nondis-
sale versus a foreclosure are better for tressed houses.
the homeowner, so there is incentive to But since short sales only make sense
25 for underwater homes, they are expect-
short sell, instead of just to walk away,”
Wahlberg, of Missoula, said. ed to decline when housing prices start
20 And for first-time home buyers and climbing again. When that will happen
other bargain hunters, short sales offer is anyone’s guess.
greater peace of mind than foreclosed Malkasian noted that as long as a
15 huge inventory of distressed, unsold
properties. Homeowners selling their
own houses, rather than turning them homes exists, homeowners and banks
10 over to lenders, are more likely to keep will resort to short sales to find buyers. “I
them in good shape. still think we have, in Wisconsin, anoth-
However, not every short sale is as cut er couple years to go before we unwind
5 all of this,” he said.
and dried as the one Johnson arranged
for his client. The bigger the difference Wahlberg isn’t sure when housing
0 between the sale price and the balance prices in Montana will return to nor-
United Minnesota Wisconsin North Montana mal—whatever that means, considering
States Dakota
owed on the mortgage, the more leery
of the deal the lender becomes. Further, the peaks and valleys the market has
■ Near negative equity ■ Negative equity many home sellers who take the short- seen in recent years. “You could say that
*South Dakota data not available sale route have second mortgages or right now is going to be the new normal
Source: CoreLogic Inc. home equity loans that they still must for the next couple of years,” he said. f
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PHOTOGRAPH BY SUE PROM


Money to burn
Fighting wildfires—in the forest The 2007 Ham Lake fire in northern
Minnesota was the biggest in the state
and in back yards—has become in 90 years, scorching 36,000 acres
and more than100 homes and cabins.
costlier in recent years
By PHIL DAVIES 32 homes near Hot Springs, S.D., in July cial legislative session to cover a budget reduction—mechanical removal and
Senior Writer 2007, and the Jocko Lakes fire that shortfall. “What we’ve seen is a really prescribed burning to reduce the inten-
broke out near Seeley Lake, Mont., later substantial escalation in the number of sity and duration of wildfires—may
It’s high wildfire season in Montana and that summer, burning through 36,000 fire seasons where we burn a lot of prove a losing battle, given the vast
much of western and central South acres and over $37 million in public acres, and a lot of those acres are threat- acreage yet to be treated.
Dakota. The sun has sucked moisture funds before it was put out. ening communities, so we tend to spend In the WUI, state and federal taxpay-
from forests and grasslands, making Over the past decade, severe wildfire a lot of money,” said State Forester Bob ers heavily subsidize risk-taking by peo-
them yearn to burn. Crews of firefight- seasons have outnumbered the mild Harrington. ple living in fire-prone areas. Because
ers and millions of dollars worth of ones, in the nation and in the Ninth Experts have ascribed the increased local governments bear a small share of
equipment—fire engines, bulldozers, District. The cost of fighting wildfires expense of wildfires in western states firefighting costs, they haven’t done
helicopters, airplanes—stand at the has risen with the flames, taxing the and the district to a hotter and drier cli- much to regulate development in the
ready to attack blazes ignited by light- resources of government agencies mate, the accumulation of deadwood WUI or imposed taxes and fees on resi-
ning, sparks from trains or careless charged with putting out fires. Last year, and other fuels in forests, and increased dents who benefit from fire protection
campers. the U.S. Forest Service alone spent over development in fire-prone areas. but pay nowhere near its full cost.
This summer could turn out to be a $1 billion fighting wildfires, mostly in Growth in the wildland-urban interface, “Something has to happen, because
mild fire season like last year, when just the western part of the country. or WUI—areas where structures inter- the local governments just aren’t taking
a few big wildfires inflicted relatively lit- In the district, the intensity of recent mingle with public forest and grass- enough responsibility for reducing fire-
tle damage on natural resources and fire years and the resulting costs are land—has attracted special scrutiny; fighting cost,” said Jeff Gies, a fire man-
private property. Or it could develop most evident in fire-prone Montana. studies have linked homes in the line of ager with the Forest Service in the Black
into a rerun of 2006 and 2007, record Over most of the past decade, state gov- fire to higher firefighting costs. Hills of South Dakota.
wildfire years in the region, when sever- ernment incurred average annual fire Strategies for tamping down fire However, local officials and landown-
al large fires raged, consuming timber, suppression costs of over $20 million— activity and escalating suppression costs ers are starting to feel the heat from the
homes and tens of millions of dollars in just a fraction of total firefighting costs face numerous obstacles; some are the rising costs of wildfires. The state of
suppression costs. There was the in the state. Costs peaked at $65 million equivalent of fighting a house fire with Montana and some fire-prone counties
Alabaugh Canyon fire, which destroyed in the 2007 fire season, requiring a spe- a garden hose. For example, fuels in the district are edging toward regu-

Continued on page 12
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Wildfires from page 11

lating development on the wildland Many wildfire experts point to home construction 2006 and 2007, for example—the num-
fringe. And some insurers are requiring ber and severity of wildfires invariably
policyholders in fire-prone areas to take in the WUI as a contributor to escalating firefighting spikes.
steps to reduce their fire risk, on pain of Another factor behind the upswing
losing their insurance.
costs—one that is likely to become more significant in fire activity and costs is a decades-
in some parts of the district. long buildup of woodland fuels that
Smoke gets in your eyes increase the likelihood of fires burning
out of control. Ironically, over a century
It may come as a surprise to some, but
of successful fire suppression by federal
wildfires are commonplace in the dis-
the district, with state legislatures again in 2006 and 2007, when over a and state agencies has contributed to
trict, as much a part of the natural order
responsible for most of the remainder. million acres—an area the size of this buildup; following Smokey Bear’s
during warm weather as bugs and back-
In 2009, the state of Montana was Minnesota’s Boundary Waters Canoe advice has stifled countless small wild-
yard grilling. National fire data show
responsible for less than one-quarter of Area—burned each year in district fires that otherwise would consume
that Montana accounts for the bulk of
the total cost of putting out fires, states, excluding the Upper Peninsula deadwood, brush and leaf litter. In
wildfire activity in the region (see Chart
according to state and national fire of Michigan. In 2006, over 1 million Montana in the summertime, hot
1). Huge swaths of public timberland
data. (Minnesota, with a smaller pro- acres burned in Montana alone. weather and a surplus of dried vegeta-
and grassland in the state become high-
portion of federal land, paid a larger An analysis of separate NIFC wildfire tion are an explosive mixture just wait-
ly flammable after snowmelt. The Black
share of overall suppression costs.) cost figures—data that capture the ing for a spark, said Harrington, the
Hills, an oasis of conifers on the semi-
Local governments pay a relatively biggest and most expensive fires— state forester. “With some fire starts, the
arid Great Plains, is another hot spot.
small portion of firefighting costs, espe- shows that total fire suppression costs in conditions are so extreme that by the
But every district state has its share of
cially for big fires that threaten private Montana, Minnesota and the Dakotas time you know that fire is there, it is
wildfires. During droughts, North
property. Figures on local cost share in surpassed $375 million between 2005 already 100 acres and rolling,” he said.
Dakota sees numerous rangeland fires
district states are unavailable, but and 2009. The chances that a wildfire will roll
that are usually extinguished quickly by
Harrington estimates that Montana Historic fire-cost data are available toward a house or subdivision have
rural fire departments. In relatively wet
counties pay less than 10 percent of the for Montana. State records of fire activ- increased in recent years. Many wildfire
Minnesota, over 1,000 wildfires break
cost of fighting large fires on county ity on nonfederal land since 1981 show experts point to home construction in
out each year, only a few of which wreak
and private land. The state assumes the that as the average number of acres the WUI as a contributor to escalating
sufficient havoc to make the news. One
costs of such fires when county or burned annually has increased, infla- firefighting costs—one that is likely to
such blaze was the Ham Lake fire in
municipal fire chiefs ask for help. tion-adjusted costs have risen even become more significant in some parts
northern Minnesota three years ago—
In South Dakota, the state pays all more sharply over the past 30 years, of the district.
the biggest in the state in 90 years,
costs of fires that occur on nonfederal more than doubling between 1991 and Over the past 25 years, development
scorching 36,000 acres of forest and
land in the Black Hills. County govern- 2009 (see Chart 2). has blossomed on the wilderness
more than 100 homes and cabins.
ments in the region pay nothing At the national level, escalating fire- boundary, particularly in tourist and
The source of fires varies. In
(although counties in the rest of the fighting costs have strained the budget retirement areas such as western
Montana, lightning starts about half of
state help pay for fighting grass fires). of the Forest Service, which does the Montana, the Black Hills and the North
wildfires; the rest are ignited by human
“The counties have very little skin in bulk of firefighting on federal lands. In Woods of Minnesota and Wisconsin.
activity—arson, smoking, bonfires,
the game when it comes to a forest fire the early 1990s, fire suppression Forestry researchers estimated in 2005
sparks from vehicles. In the eastern part
in South Dakota,” said Jim Strain, assis- accounted for about 13 percent of Forest that 60 percent of the homes built in
of the district, the overwhelming major-
tant chief of the state’s Wildland Fire Service expenses; by 2009, it consumed this country in the 1990s were built in
ity of fires are caused by people.
Suppression unit. about half of the agency’s budget. Last WUI areas. In 2000, about 40 percent of
Typically, big fires provoke a multi-
pronged assault from local fire depart- year, Congress created reserve accounts all homes in Montana were located
ments and firefighting crews from state Flaming budgets to cover firefighting costs in severe fire within a mile and a half of forestland.
departments of natural resources Firefighting by the Forest Service, state seasons when the annual budgets of the More development means more cab-
(DNRs) and federal agencies such as DNRs and other public agencies pro- Forest Service and the Department of ins, houses and other structures that are
the Forest Service. State and federal motes the general welfare by protecting the Interior are exhausted. defended from wildfire, often at consider-
units supply the heavy, expensive resources such as timber, wildlife habi- In the district, states feel the finan- able expense. (The presence of humans
weaponry often deployed to stop or tat and homes that would otherwise be cial impact of fighting wildfires in dif- also increases the number of wildfire
slow an advancing wildfire: bulldozers destroyed. If tax dollars were not spent fering degrees. Minnesota spent about starts, but not necessarily costs because
to clear fire breaks, helicopters with suppressing fires, society would suffer $15.5 million on fire suppression in most wildfires are quickly extinguished.)
water-scooping buckets, air tankers that far greater economic losses (see 2009—a minuscule piece of roughly The WUI effect is most pronounced
dump water or fire retardant. “Counting the full cost of wildfires” on $25 billion in state spending that year. in the western part of the district, where
After the fire, the various agencies page 14). But over the past 10 or 15 In Montana, a state with one-fifth the fire danger within or adjacent to public
share suppression costs, usually based years, the cost of keeping wildfires in budget of Minnesota, record fire forests can be extreme. Firefighting offi-
on acres burned in each jurisdiction. check has risen markedly, along with expenses in 2007 required $39 million cials in the region see a connection
Cost-share agreements differ from state the amount of land ravaged by fire. in special appropriations. From 2006 to between rising suppression costs and
to state and from fire to fire, with other After staying fairly constant for 30 years, 2008, South Dakota’s governor sought development in the WUI. “That has
factors such as resources expended and acreage scorched by wildfires across the $2.4 million in emergency funding to absolutely been a cost driver for wild-
structure protection taken into country almost doubled in the 2000s, douse prairie fires in the western and fires” in Montana, Harrington said. In
account, and different cost splits for according to the National Interagency central parts of the state. the Black Hills, Strain said, increased
federal versus state agencies. The Fire Center, a clearinghouse for fire development “does indeed drive up our
Federal Emergency Management data. Costs also soared: In the 1990s, fire costs over time. Once you put pri-
Agency often helps pay for large, dan- federal agencies spent an average of
Waiting for a spark mary residential houses and structures
gerous—and expensive—fires that about $400 million annually in today’s Probably the single biggest reason for in a forest setting, it’s more expensive to
threaten communities or subdivisions. dollars fighting wildfires; since 2000, the increase in wildfire activity and sup- fight the fire.”
For FEMA-declared fires like the they have burned through at least $1 pression costs in the region is a shift in Nationally and in the district, fire
Alabaugh Canyon fire and last year’s billion annually. weather patterns. Government and aca- suppression costs per acre burned
Eagle Mount fire near Columbus, Comprehensive, long-run data on demic research has linked higher-inten- haven’t increased over the years—an
Mont., the federal government pays up the cost of fires aren’t available for dis- sity, longer fire seasons since the 1980s indication that, for all fires, cost increas-
to 75 percent of firefighting costs. trict states. But NIFC statistics show that to earlier snowmelt and warmer, drier es have more do with weather patterns
After all costs are allocated, the fed- the region has experienced a rash of summers, possibly caused by oceanic and the accumulation of fuel than
eral government ends up paying the severe fire seasons during the past cycles or global warming. When parts of woodland sprawl. However, a number of
lion’s share of fire suppression costs in decade. Fire activity spiked in 2003, and the district suffer drought—in 2003, recent studies have linked WUI devel-
fedgazette N I N T H D I S T R I C T F E AT U R E
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FP
O
At the 2007 Jocko Lakes fire near Seeley Lake, Mont., a firefighter supervisor drives through flames that jumped the road.

opment to higher suppression costs for that grew quickly and marched toward
large wildfires. 200 homes on a ridge near Rapid City, Chart 1 1,200
Headwaters Economics, a research S.D. “When you get that type of fire and
group based in Bozeman, Mont., ana- you have that many homes being threat- Wildfire
1,000
lyzed daily fire suppression costs for 18 ened, you pull out all the stops,” he activity
large wildfires that burned in Montana said. “You start requesting lots and lots varies
Acres burned (thousands)

800
during 2006 and 2007. The study found of resources—local, county, state, feder- greatly
that each additional house within one al.” Putting out the East Ridge fire, from year
mile of a wildfire was associated with a which burned seven homes, cost tax- to year 600
$7,900 increase in suppression costs. For payers about $2 million. Burned land
conflagrations in areas with relatively in district 400
dense development, about 30 percent of states
the cost of fighting those fires was relat- Slash and burn 200
Montana
ed to structure protection. Another If hotter and drier conditions are main-
study of large wildfires fought by the U.S. ly responsible for the upsurge in wild- Minnesota,
North Dakota, 0
Forest Service found that as total home fire activity and suppression costs, South Dakota,
values within 20 miles of a fire ignition there’s not much that can be done Wisconsin 2002 2003 2004 2005 2006 2007 2008 2009
increase, so do firefighting costs. about that, at least in the short term. Source: National Interagency Fire Center
Protecting “values at risk” from an However, public policy and private mar-
advancing wildfire is expensive because kets can mitigate the harmful effects of
Chart 2 120 $25
it typically involves heavy concentra- natural phenomena such as floods, tor-
tions of firefighters and equipment. A nadoes and wildfires. It may be possible In Montana,
rule of thumb in defending houses or to reduce the number of large, raging more wildfire 100
$20
subdivisions calls for one fire engine fires—and the tax dollars burned put- and higher
Acres burned (thousands)

and crew to be assigned to each struc- ting them out. costs 80


Costs** (millions)

ture. Determined to save lives and prop- Most efforts to tame wildfire risk over Burned $15
erty, fire chiefs often summon costly the past decade have focused on fuels nonfederal 60
reinforcements—large structural engines, reduction on public land—thinning land*
bulldozers, tanker airplanes. Aircraft tree stands and eliminating brush and Decennial averages $10
40
are particularly pricey, accounting for forest litter to prevent large, intense
Acres burned
about one-third of total firefighting fires that rip uncontrolled through
$5
costs on a big blaze. forestland. Fuels treatment includes Costs** 20
Denny Gorton, fire coordinator for prescribed burning and letting smaller
*Excludes Montana fires in national
Pennington County in the Black Hills, wildfires burn within predetermined forests and on other federal land 0 0
has battled several big wildfires that boundaries. **2009 dollars 1980s 1990s 2000s
imperiled houses, including a 2006 fire Such treatment has increased over
Source: Montana Department of Natural Resources and Conservation

Continued on page 14
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Wildfires from page 13

ing fast enough, and ultimately it may est is all black around my house, I might
prove futile. Studies have shown that as well let my house burn down because
the Forest Service and other federal I don’t want to live here anymore,” said
agencies would have to treat between 10 Tim Eggers, fire chief of Lead, S.D.
million and 12 million acres nationwide Curbing development in the WUI—
each year to significantly reduce wild- by banning home building in hazardous
fire risk—more than double the current areas, for example—is probably infeasi-
PHOTOGRAPH BY SUE PROM

pace of fuels reduction. At Montana’s ble, both economically and politically.


accelerated 2009 pace, treating all the The desire to live in scenic, wooded
federally owned forest in the state areas of the district is strong, and local
would take more than a century—by governments covet increases in proper-
which time much of the purged biomass ty tax revenue that development brings.
would have grown back. After a lull due to the national reces-
Moreover, a struggling timber indus- sion, growth in the WUI, especially in
try in Montana and other western states western states, is projected to continue
A firefighting crew gathers at the Ham Lake fire in Minnesota in 2007.
has removed a major source of demand apace in a recovering economy.
for logs from selective cutting of trees But it’s an economic axiom that
Counting the full cost of wildfires on public land. those who benefit from a good or serv-
ice should bear its costs, and this rule
Firefighting costs, the focus of this article, amount to a small portion of the Homeland defense should also apply to wildfire protection
on the forest fringe. Noting that federal
economic costs of wildfires. This is especially true for big wildfires that rage The one element of wildfire suppres-
agencies don’t have power to regulate
out of control, consuming vast expanses of forest and burning private sion cost that is completely under
local development, a 2006 report by the
human control is development near
property. Estimates of the total cost of large wildfires to landowners, U.S. Department of Agriculture’s Office
wildlands. If protecting private property
investors and taxpayers range from 10 to 50 times the cost of fire suppres- of Inspector General recommended
in the WUI drives up firefighting costs,
sion. Wildfire experts and economists generally divide actual wildfire costs then perhaps the conditions that con- that state and local governments accept
tribute to higher costs—government more financial responsibility for fire-
into three categories:
policies that encourage disregard for fighting in the WUI.
fire risk, for example—can be changed. Such a shift “should provide an
Direct costs. These are values directly consumed by flame or related to incentive for a behavior change, such as
Wildfire research has shown that the
controlling and managing fires. They include suppression expenditures, best way to protect structures from wild- changing zoning rules or building
damage to homes, public infrastructure and personal property, burned fire—and avoid heroic firefighting codes,” noted Krista Gebert, a Forest
efforts—is for owners to create “defensi- Service economist based in Missoula
timber, lost business revenues, and the expense of evacuating residents and
ble space” by removing surrounding who co-authored the cost study of large
treating the injured. wildfires fought by the agency. In par-
trees, undergrowth, pine needles and
other flammable materials. “The ticular, tapping city and county govern-
Indirect costs. These are typically unaccounted for in government audits biggest fire risk out here is that people ments for a greater share of firefighting
and media reports. Examples are firefighting readiness expenses such as aren’t doing enough to treat their own costs would put pressure on them to try
land,” said Gies of the Forest Service. to reduce wildfire risk to private prop-
crew training and equipment maintenance, fire insurance premiums (paid
Using fire-resistant construction materi- erty. (Alternatively, they could raise
in anticipation of fire), lost investments in reforestation and other natural property taxes or levy special fire pro-
als on roofs and decks can also prevent
resource management, and degraded recreational value. house fires started by embers carried on tection fees on homeowners in haz-
the wind from nearby wildfires. ardous areas.)
Post-fire costs. Long-term damage to the economy and the environment But there’s a major obstacle to mak- Responding to the high costs of
ing builders and property owners recent fire seasons, the state of Montana
may not become apparent for years. Lingering effects of wildfires include
responsible for keeping the flames at and some counties in the district have
declines in the capital value of timberland, reduced property tax revenue, taken halting steps toward making
bay: a disconnect between who benefits
chronic illness due to smoke exposure, increased soil erosion, and ongoing from construction in the WUI and who development in hazardous areas more
salvage, repair and rehabilitation costs. pays when those structures are threat- resistant to fire. In Montana, legislation
ened by fire. enacted in 2007 encourages local gov-
Because local governments pay little ernment to follow state guidelines on
When all of these costs are added up, the economic toll exacted by wild-
or none of the cost of defending homes the use of fire-resistant building materi-
fires can be staggering. The Ham Lake fire in Minnesota in 2007 cost or subdivisions from wildfires, they have als in the WUI, in return for aid to local
about $11 million to extinguish. Assuming conservatively that suppression scant incentive to reduce fire risk by fire departments drawn from federal
expense amounted to roughly 10 percent of total costs, the full cost of that restricting development in hazardous fuels-reduction dollars.
blaze—just one of thousands that burned in the district that year—likely areas or requiring defensible space and In the northern Black Hills,
fire-wise construction methods. Some Lawrence County started requiring
will exceed $100 million over time.
local officials reject the notion that WUI wildfire hazard inspections of new sub-
—Phil Davies development increases suppression costs, divisions last year. Developers must
arguing that if federal and state agencies comply if inspectors order them to trim
were more diligent in treating fuels on vegetation, improve road access and
the past decade, both nationally and in have received federal dollars to reduce public land, fewer fires would invade pri- take other action to mitigate fire dan-
the district. In Montana, the Forest fuels in areas identified in Community vate land and endanger homes. ger. Although the measure doesn’t
Service, Bureau of Land Management Wildfire Protection Plans. About 4,000 For their part, property owners gen- address building codes (the county has
and other federal agencies cut and communities across the west, including erally don’t give much thought to wild- no building inspector) or existing sub-
burned about 114,000 acres last year, Rapid City, S.D., and Missoula, Mont., fire peril, trusting firefighters to come divisions, Eggers said that it will make
more than double the acreage treated have adopted such plans. “We’re seeing to the rescue or, in the worst case sce- firefighting easier as more clusters of
in 2003. Minnesota saw a comparable a sizable amount of acres getting nario, insurance or federal disaster houses sprout among combustible
jump in treated federal land, much of it worked up in fuel reduction activities,” assistance to cover their losses and let pines. “It was just a recognition by the
in the Boundary Waters, where a 1999 Strain said. “Whether it’s made a differ- them build anew—often somewhere county that with the amount of growth
windstorm had leveled millions of trees. ence or not, time will tell.” else near the forest. “You get a lot of that was going on, something needed to
District states and local governments It’s not clear that such activity is mov- people with the attitude that if the for- be done,” he said.
fedgazette N I N T H D I S T R I C T F E AT U R E
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JULY 2010

Smoke billows at the 2006 Red Eagle wildfire in Glacier National Park.

Some insurers have tightened their For premiums to accurately reflect


Large* wildfires in the Ninth District, 2007 requirements for wildfire coverage, usu- wildfire risk, firefighting agencies would
ally sold as part of a home or commer- have to abandon their practice of pro-
cial property policy. State Farm tecting private property at all costs—an
Insurance introduced a wildfire hazard unlikely scenario, observed Montana
inspection program in 2003 and has State Sen. Bob Hawks, who sponsored
since expanded it to 13 states, including last year’s WUI wildfire legislation. “If
Montana. Landowners must show we just considered all territory to be
inspectors that they’ve cut brush, equal in our [firefighting] response,
moved log piles, installed wildfire sprin- then homeowners would pay an
kler systems and taken other action to increased insurance cost … which is the
enhance fire safety. Those who don’t way the market should work. But our
comply risk cancellation of their policy. sense of protecting people and proper-
“The financial incentive for people to ty is high.”
do the right thing and protect their There’s the rub with wildfires, and
*In most cases, fires that burned at least 100 acres of timber or 300 acres of rangeland. property is motivated by keeping your not just blazes threatening homes and
Source: National Interagency Fire Center insurance,” Walker said. Allstate other buildings in the WUI. When fire
Insurance Co. and USAA have similar rages across the landscape, federal and
inspection programs. state agencies and local fire depart-
ments respond aggressively, dispatching
Insurance In most WUI areas, fire insurance is
fire crews and expensive equipment to
worried much about wildfire losses available and relatively inexpensive
to the rescue? because they make up a small propor- compared with other types of insur- battle the flames. Very few fires are left
Insurance markets offer another tion of payouts; according to the ance. For all their concern about curb- to burn themselves out; in Montana, 96
approach to cutting fire risk and sup- Insurance Information Institute, cata- ing wildfire risk, State Farm and other percent of fires on state land are put out
pression costs in the WUI. If insurance strophic fires account for about 2 per- insurers have not appreciably raised before they exceed 10 acres in size.
companies raised fire insurance premi- cent of U.S. insurance losses, compared rates, and they have canceled only a tiny If more hot, dry summers lie in store
ums, some prospective home buyers with 26 percent for tornadoes and 46 percentage of policies. This forbear- for the district’s forests and grasslands,
might forgo a place in the woods, result- percent for hurricanes and tropical ance is understandable; public policy the cost of suppressing wildfires will rise
ing in fewer houses to defend in the storms. But devastating wildfires in sends a clear signal that the government with the columns of smoke.
event of a wildfire. Existing homeown- California over the past 15 years have will shield private property from wild- Everybody—people who live in cities
ers, in order to lower their rates—or alerted the industry to the potential for fire, even in high-risk areas. In setting and relatively wet areas at little risk from
qualify for coverage at any price—might huge property losses. “It’s been on our their rates, insurers factor in local fire- wildfire as well those squarely in the fire
carve out defensible space, replace shin- radar for a long time,” said Carole fighting capacity—what firefighting zone—will foot the bill. f
gle roofs and take other steps to reduce Walker, executive director of the Rocky resources are in the vicinity and how
the chances of disaster. Mountain Insurance Information quickly they can arrive at the scene of
Historically, insurance firms haven’t Association in Denver. an approaching wildfire.
fedgazette N I N T H D I S T R I C T F E AT U R E
Page 16
JULY 2010

Sweet productivity
An interview with
Minneapolis Fed economist
James Schmitz
James Schmitz is a senior economist at the Federal
Reserve Bank of Minneapolis and a visiting
professor at the University of Minnesota. His research
focuses on the sources of innovation and economic
growth, often through historical case studies.
In a recent staff report (SR 437
online at minneapolisfed.org),
he looked at sugar beet production
and sugar refining, while in an
PHOTOGRAPHS BY MARC NORBERG

earlier published paper, he studied


iron ore mining, both of which
are important industries in the
Ninth District. Staff Writer
Joe Mahon sat down with him
to talk about his research.

fedgazette: What made you want to years it wasn’t binding; after the Cuban The provisions for firms didn’t pre- California. A lot of cities were growing;
study the sugar business? Revolution, for example, [farmers] were clude them from closing a factory in a lot of agricultural land was becoming
allowed to grow whatever amount of one state and moving to another, but it nonagricultural. And so the value of
James Schmitz: Well, a big part of my beets they wanted for a few years. wouldn’t make sense to move some- the land was going up faster than in
research is thinking about the impact Anyway, it was a pretty complicated where with no beets to process. North Dakota.
of competition, particularly its effects system. I don’t think we said it in the So in ’74, you’re still using one unit
on productivity. And an interesting era paper, but in one of the archives (at fedgazette: There’s now a lot of sugar of land in California and North
for competition in U.S. history is the the University of Colorado, Boulder: production in the Ninth District, par- Dakota. But the cost of land was much
Depression era, because the U.S. gov- the Great Western Sugar Company col- ticularly in the Red River Valley, but higher in California. So if you get rid
ernment allowed manufacturing industries lection), I found this huge handbook there wasn’t as much during the cartel of this cartel, production moves from
to cartelize, and I’m interested in the of how the cartel was administered. A years. Why was it that after this 40-year California to North Dakota. Productivity
effect of that. lot of it was done at the county level by period, it became advantageous to pro- goes up in the sense that the cost of
Now, in most industries, the cartels farmers and representatives of the gov- duce sugar in the Midwest? your inputs is going down.
didn’t last very long, but some cartels ernment. But it’s a huge book, hun-
lasted a long time, like the sugar cartel, dreds of pages. Through the handbook Schmitz: Well, the productivity of mak- fedgazette: There was also this tax-sub-
which lasted 40 years—from 1934 to and other sources, we were able to fig- ing sugar in North Dakota went up sidy scheme, which you argue in the
1974. That was the main thing that got ure out pretty well how the cartel faster than in, say, California over the paper played a big role in distorting
me interested in the industry. It was a worked. 40-year period. Let’s make it very sim- productivity. Can you explain how that
long period of time and there was a lot ple: Suppose the only input into mak- worked?
of data, from archives and other fedgazette: By necessity, the quotas ing sugar was land, and it took one
sources. were supposed to keep out competi- unit of land to make one unit of sugar Schmitz: The purported motivation for
tors. Were they successful in doing in California and in North Dakota. the subsidy was that since farmers are
fedgazette: When you say “cartel,” that? And suppose in 1934 the price of a going to voluntarily abide by these quo-
many people will think of drug cartels. unit of land was the same in California tas, we’re going to give them a bonus,
But the sugar cartel was actually a legal Schmitz: Yes. Literally, I don’t think as in North Dakota. So the physical some subsidy. Now, Congress wanted
cartel, set up by the government. any new firms entered, and the firms productivity was the same, and the that to be revenue-neutral, and that
Could you go over briefly how it abided by their sales quotas. input price was the same. Now suppose was part of the law actually. So they
worked, how exactly the cartel was in California the value of the land taxed the sugar coming out of facto-
structured? fedgazette: You found that the cartel goes up faster than the value of the ries—regardless of where the sugar was
prevented production from moving land in North Dakota. The opportunity grown—to pay for those subsidies to
Schmitz: It was run through the geographically. How? cost—the alternative use of land— farmers. The good news for the beet
Department of Agriculture; they set up that’s what’s really determining its sugar industry was that a lot of taxes
sales quotas every year for each firm. Schmitz: By giving quotas to farmers price. Well, California wasn’t a very big were paid by the sugar factories in New
And they gave farmers quotas every year, based on pre-existing acreage, the car- economy in ’34. But over the 40-year York, Baltimore and so on that
tied to precartel acreage. Some of the tel locked beet production in place. period, a lot of stuff happened in processed raw cane sugar from Cuba
fedgazette N I N T H D I S T R I C T F E AT U R E
Page 17
JULY 2010

and other smaller foreign sources. Switching over to new Dakota is a much more productive change in work rules in the paper—
The subsidy to farmers, in turn, was place to make sugar than the when the mines went to eyeball-to-eye-
based on the amount of sugar that they technologies or management Netherlands, just given the land alone. ball crew relief.
had in their crops. You measure that by
taking the tons of beets and multiply-
practices can be costly to firms. fedgazette: I want to talk about anoth- fedgazette: What’s that?
ing that by the percentage of sugar in If the transition disrupts er industry you’ve studied that’s very
an average ton. In the paper, we called important in the Ninth District, and Schmitz: When you had crew relief
it “sugar in the crop.” production, say, if there’s a that’s iron ore mining. Your research before the Brazilian threat, you
The best way to think about it for was on the historical productivity of brought small vans around to pick peo-
the industry as a whole, when you con-
steep learning curve or a strike, this industry, but instead of carteliza- ple up on their blasting equipment
sider the factories and the farms the lost production can be tion, you looked at foreign competi- and ore-hauling trucks, and you
together, is that before the cartel, the tion. So what was your interest in the brought them back to a central loca-
only source of revenue to the industry costly. What’s the cost of that? iron ore industry? tion. And then you filled up the vans
came from processed sugar. Now with new people, and you took them
there’s some revenue going to the
Well, the cost is tied to lost sales Schmitz: Well, in the 1980s, there had out to the equipment. So the equip-
industry based on how much sugar revenue. You’re not going to do been a threat of competition from ment is idle as you’re changing shifts.
they had in their crops before extrac- Brazil, and the industry increased its Now, suppose you took the new crew
tion, and that’s going to affect the way this during a period where productivity pretty dramatically. And I out to the machines in the same vans
they produce beets; it’s going to distort was just simply trying to understand and dropped them off as you picked
their decisions.
prices are high; you’ll do it in how it happened—how did they raise up the old crew. The crews pass eye-
a period where prices are pretty their productivity? So that’s sort of a ball-to-eyeball. Before the threat of for-
fedgazette: How were their decisions classic question, I guess. We saw com- eign competition, some of the mines
changed? weak. Competition lowers petition, and we saw productivity go were not eyeball-to-eyeball, and they
up. Why? changed in response. Very little has
Schmitz: You can farm beets in such a
prices, and so it lowers the A little esoteric point is that there changed in the mine itself, you’re just
way that you increase the tonnage of opportunity cost of changing really wasn’t a lot of increase in getting more output.
beets and the total amount of sugar in imports into the region during this
a crop, but at the same time, decrease practices. That’s one idea. period. In the models economists work fedgazette: How is it that just the mere
the percentage of sugar in each beet. with, the gains from trade are closely threat would have initiated these
That’s what the industry did, and the tied to how many imports come in. So changes in management practices?
quality of beets—their percentage of these models completely miss the effect
sugar—fell. have control over the rain, and you don’t that you don’t have to have imports Schmitz: There are some ideas that
have irrigation either. So quality fell less come in to see the benefits of competi- Tom Holmes and David Levine and I
fedgazette: So that’s a theoretical story in the Midwest. In the Chaska [Minn.] tion. Some people lost their jobs, and had. Switching over to new technolo-
about how incentives changed for the factory, I don’t think it fell at all. that’s obviously not a benefit to those gies or management practices can be
industry. What evidence can you point people. But in terms of the industry’s costly to firms. If the transition disrupts
to that the cartel did, in fact, distort fedgazette: The sugar cartel is over productivity, there were benefits. production, say, if there’s a steep learn-
decisions? now, but there are import quotas and We had the mine-level data in ing curve or a strike, the lost produc-
tariffs. Do you have any thoughts on Minnesota, so we were able to ask tion can be costly. What’s the cost of
Schmitz: What’s interesting is you can how these contemporary protectionist whether industry productivity went up that? Well, the cost is tied to lost sales
see it in the national level; beet quality measures might be affecting productiv- because they closed the least-produc- revenue. You’re not going to do this
starts falling in ’34 when the cartel ity in the industry? tive mines. And that really was not a during a period where prices are high;
starts. I don’t know exactly how many big factor. They only closed a couple you’ll do it in a period where prices are
factories there were back in 1934, on Schmitz: The first thing I want to say is mines, and one of those opened up pretty weak. Competition lowers prices,
the order of 100. It turned out that we that I really focus on the period of the again. It was just that they sort of reor- and so it lowers the opportunity cost of
found information on a lot of these cartel which ended in 1974. But clearly, ganized work in the mines. They were changing practices. That’s one idea.
factories in archives all around the everything else equal, if you had more able to increase their productivity a lot But it still doesn’t get into why man-
country. competition, productivity probably through changing their work rules. agement and workers couldn’t agree to
Now, as an economist you ask, “Well, would go up. There’s still a little bit of things like eyeball-to-eyeball crew relief
is quality falling in every factory?” And, sugar production in California, and if fedgazette: What do you mean by work in the first place.
in fact, it was happening at most facto- import quotas and tariffs were elimi- rules?
ries. There were regional differences, nated, that would probably go away. fedgazette: So the puzzle is if there
and that’s one of the key things too. The sugar producers in our region I’m Schmitz: Well, for example, you might were these potential gains to productiv-
You can drive up sugar in the crop, guessing are the most productive in have a certain repair classification, and ity, why were they not being exploited?
driving down beet quality in the the country. And so these other pro- if you had that classification, you
process, by watering and fertilizing ducers outside our region would have weren’t able to work on certain types of Schmitz: Yes. Obviously, management,
heavily in a certain part of the growing the hardest time. machines or certain other types of jobs, employees and the union could not
cycle, but restricting water closer to har- I think we would knock the socks off even if you might have been quite capa- reach agreements to achieve these pro-
vest, when more rainfall would just the Europeans if we had to compete ble of doing the repair work. And a rule ductivity gains. The puzzle is why not,
pump up the beets with water. It was with them. There’s no North Dakota in like that leads to lower productivity. and there’s no good answer for that.
easiest to manipulate quality in areas Holland, when it comes to land values, Let’s say machines go down for some
that were arid and had access to irriga- and there’s no North Dakota in reason. You want to get them back up fedgazette: Thanks for talking with us,
tion, such as California. And certainly in France. They’re using very valuable operating as quickly as possible, but if Jim.
those areas you saw beet quality falling land for growing beets there. Europe you have to wait to get the correct clas- —Joe Mahon
right away in all of the factories. In the actually makes tons of beet sugar, and sification of worker there, the machine
Midwest, you have more difficulty they export tons of it. But we would is down longer than it has to be.
manipulating quality since you don’t knock their socks off because North There’s actually a great example of a
fedgazette D I S T R I C T D ATA
Page 18
JULY 2010

Minnesota Manufactured Exports


Manufacturers turn the page
Total Exports
Annual
Percent
on poor 2009 exports
2009 Change
(millions of dollars) 2008–2009 Exports slump across states and sectors
Top Five Destinations
Europe 4,224.8 –18.4 By ROB GRUNEWALD Wisconsin due to relatively hefty increas-
Canada 3,805.2 –20.7 Associate Economist es in machinery sent to Chile and Peru.
Asian NIEs* 1,478.3 – 2.3 However, steep declines were more
Southeast Asia 1,037.5 –23.3 WONHO CHUNG the rule. Exports to Canada decreased
China 955.4 4.9 Research Assistant by 20 percent or more from all district
states, except North Dakota, where
Total Manufactured Exports 14,613.7 –15.5 A global recession and small appreciation exports dropped by a more modest 7
Annual of the U.S. dollar led to the largest annu- percent. Exports to Europe were down
Total Exports Percent al decrease in exports at both the district across the board, but off the most from
2009 Change and the national level since export data North Dakota, at 45 percent. South
(millions of dollars) 2008–2009 first became available in 1997. Dakota, which had the steepest overall
Last year, district and U.S. manufac- export decline of 38 percent, posted a
Top Five Industries tured exports dropped 18 percent to combined decrease of more than 70
Computer and Electronic Products 3,378.3 –19.5 $33.7 billion and $916.7 billion, respec- percent to Hong Kong, Singapore,
Machinery, Except Electrical 2,445.3 –16.4 tively (see Chart 1). The bloodletting was South Korea and Taiwan.
Miscellaneous Manufactured Commodities 1,935.3 – 1.2 widespread, affecting virtually all export
Transportation Equipment 1,652.9 – 18.5 destinations and product sectors. U.S. dollar stronger
For example, all district states saw
Food and Kindred Products 1,231.2 –13.3
decreases in exports to Canada and
in 2009
Total Manufactured Exports 14,613.7 –15.5 Europe, the district’s largest export des- The average value of the U.S. dollar rel-
tinations, which account for over half of ative to the Canadian dollar and the
Montana Manufactured Exports all manufactured exports. While GDP euro increased by 7 percent and 6 per-
growth was still positive during 2009 in cent, respectively, during 2009 com-
Annual
Total Exports Percent some developing countries, including pared with the previous year, which
2009 Change China and India, district exports increased the cost of district exports
(millions of dollars) 2008–2009 decreased to almost all of these destina- abroad. A broader measure of the value
tions as well. of the U.S. dollar relative to the curren-
Top Five Destinations
There were a few bright spots. cies of 26 major trading partners
Canada 335.8 –28.6 Minnesota exports to China rose by 5 increased 6 percent (see Chart 1).
Europe 136.7 –13.8 percent, and North Dakota saw a 60 per- In contrast, the value of the U.S. dol-
Asian NIEs* 135.7 – 20.7 cent increase in exports to Mexico, pri- lar relative to the Japanese yen
Japan 129.2 –1.2 marily from shipments of food and kin- decreased by 9 percent during 2009,
China 59.2 –2.7 dred products. Exports to South making district goods relatively less
America also increased slightly from expensive in Japan and a likely reason
Total Manufactured Exports 875.9 –19.7
Annual CHART 1 Manufactured exports tumbled in 2009
Total Exports Percent
Percent change from a year earlier
2009 Change
(millions of dollars) 2008–2009
20
Top Five Industries
Chemicals 303.0 –14.2 Ninth District
15 manufactured
Machinery, Except Electrical 156.6 –15.2
exports**
Primary Metal Manufacturing 121.5 5.7 10
Transportation Equipment 76.7 – 48.8
Nonmetallic Mineral Products 39.2 –10.1 5
Total Manufactured Exports 875.9 –19.7
0
North Dakota Manufactured Exports
Annual –5
Total Exports Percent United States Currency exchange index*
2009 Change manufactured
(millions of dollars) 2008–2009 –10 exports**
Top Five Destinations
Canada 825.7 – 6.8 –15
Europe 170.0 – 45.4
Mexico 145.8 59.6 –20
Pacific Islands 103.4 13.6
Former Soviet Republics 84.7 – 68.8 –25
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Total Manufactured Exports 1,474.8 –22.2 *Trade Weighted Exchange Index: Broad. A weighted average of the foreign exchange value
of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.
*Asian NIEs (newly industrialized economies) include Hong Kong, Singapore,
**2009 dollars
South Korea and Taiwan.
Source: WISERTrade International Trade Database, Holyoke Community College
fedgazette D I S T R I C T D ATA JULY 2010
Page 19

CHART 2 Durable goods fell harder than nondurables North Dakota (continued)
Percent change in manufactured exports 2008 to 2009 Annual
Total Exports Percent
30 2009 Change
(millions of dollars) 2008–2009
Top Five Industries
20
Machinery, Except Electrical 801.8 –32.2
Food and Kindred Products 322.1 48.5
10
Transportation Equipment 144.1 –37.5
Chemicals 43.6 –49.0
0 Beverages and Tobacco Products 32.9 34.5
Total Manufactured Exports 1,474.8 –22.2
–10

–20
South Dakota Manufactured Exports
Annual
Total Exports Percent
–30 2009 Change
(millions of dollars) 2008–2009
–40 Top Five Destinations
Canada 322.6 – 33.2
–50 Mexico 232.8 –17.9
Europe 135.2 –29.1
Southeast Asia 63.3 –70.6
–60
South North Wisconsin Montana United Minnesota Asian NIEs* 51.8 –71.4
Dakota Dakota States
Total Manufactured Exports 927.1 –38.4
■ Durable goods ■ Nondurable goods
Annual
Source: WISERTrade International Trade Database, Holyoke Community College Total Exports Percent
2009 Change
(millions of dollars) 2008–2009
that district exports there saw a smaller decrease in chemicals by 49 percent Top Five Industries
overall decrease (6 percent). from North Dakota. Steep declines Food and Kindred Products 312.3 –9.9
A silver lining in the data is that while were also noted in South Dakota, Machinery, Except Electrical 151.9 – 41.4
the level of manufactured exports was where machinery decreased 41 per- Computer and Electronic Products 131.2 –74.2
down substantially last year, quarterly cent and computer and electronic Beverages and Tobacco Products 85.8 –27.8
data show gradual improvement over products decreased 74 percent. Transportation Equipment 66.9 –29.3
the course of the year. By the fourth Exceptions include a 6 percent
quarter 2009, exports were down only 9 increase in exports of primary metal Total Manufactured Exports 927.1 –38.4
percent from a year earlier, compared products from Montana, which were
with a decline of more than 20 percent largely sent to Japan. Meanwhile, Wisconsin Manufactured Exports
for the first three quarters. If modest exports of food and kindred products
Annual
improvement continues through this were up 49 percent from North Total Exports Percent
year, 2010 will likely pull ahead of 2009’s Dakota. 2009 Change
dismal performance. However, it may (millions of dollars) 2008–2009
take longer to top 2008’s level of $41.1 Exports to Iraq and Top Five Destinations
billion in total exports.
Afghanistan increase Canada 4,516.2 –25.0
Europe 3,282.6 –19.3
Durable goods lead The presence of U.S. military opera-
Mexico 1,481.8 –1.8
tions coincided with increases in dis-
decline in export products trict manufactured exports to Iraq and South America 1,186.5 0.7
Exports of durable manufactured goods Afghanistan from practically zero early China 1,009.0 – 8.6
(products with a useful life of more than in the decade to over $20 million to Total Manufactured Exports 15,777.1 –18.2
three years) make up the three largest each country in 2009. Nevertheless,
export categories in the district: machin- these levels represent only a tiny frac- Annual
ery, computer and electronic products, tion of total district exports. Total Exports Percent
2009 Change
and transportation equipment. Their Iraq received $24 million in district (millions of dollars) 2008–2009
steep declines were a central factor in exports in 2009, an 8 percent increase
the overall drop in manufactured from a year earlier. About 85 percent of Top Five Industries
exports as global demand for durable the exports included machinery and Machinery, Except Electrical 4,889.6 –21.6
goods fell sharply during the recession transportation equipment. Computer and Electronic Products 2,895.1 –7.0
(see Chart 2). Nondurable goods tend- Exports to Afghanistan increased Transportation Equipment 1,475.4 – 43.2
ed to decrease at a more modest pace, 73 percent in 2009 to $20 million. Food and Kindred Products 1,092.7 –10.2
such as the district’s fourth-largest Over half of these exports were trans- Electrical Equipment, Appliances and
export industr y, food and kindred portation equipment, with machinery, Components 977.5 –12.4
products, which decreased by 8 per- food and kindred products, and elec-
Total Manufactured Exports 15,777.1 –18.2
cent. trical equipment, appliances, and
Trends by particular industr y components making up most of the
include a drop in transportation equip- remainder. f *Asian NIEs (newly industrialized economies) include Hong Kong, Singapore,
ment by more than 40 percent from South Korea and Taiwan.
Wisconsin and Montana and a Source: WISERTrade International Trade Database, Holyoke Community College
fedgazette D I S T R I C T D ATA
Page 20
JULY 2010

Professional services firms expect


rebound over the next year

By TOBIAS MADDEN and selling prices fell. Input costs rose, An uptick in activity is expected at professional business service firms
Regional Economist as 42 percent of firms reported higher (Above 50 indicates expansion; below 50 indicates contraction)
input costs and only 5 percent reported
Accountants, architects, engineers, mar- lower input costs. Wages grew an aver- 100
ket researchers and other professional age of 2 percent, and benefits per work-
90
services firms experienced a significant er rose 1.6 percent. Profits for firms fell
decline in business over the past year, significantly, as only 26 percent of firms 80
according to results of an annual May noted an increase in profits, and 56
survey conducted by the Federal percent noted a decrease. Employment 70
Reserve Bank of Minneapolis and the levels fell, with 32 percent of firms
Minnesota Department of Employment reporting lower employment and 11 60
and Economic Development. percent reporting higher employment.
Widespread decreases in prices, Obtaining credit is still a problem; 23 50
employment and sales revenue were percent of respondents found that
40
reported by survey respondents. access to bank credit had deteriorated
Coupled with a significant increase in over the past three months compared 30
input costs, those decreases resulted in with only 3 percent reporting improved
plunging profits. In addition, office credit conditions. 20
space usage was flat, exports were stable Professional business services firms
and productivity did not change (see are somewhat optimistic about the next 10
chart). Some firms noted a continued four quarters. Sales revenue is expect-
tightening of credit conditions. Looking ed to rise, according to 36 percent of 0
Sales Profits Productivity Employment Labor Selling Input Space
ahead to the next four quarters, firms the respondents, compared with 24 revenue level Availability Prices costs occupied
(full-time) (square
expect orders to pick up and plan to percent expecting lower revenues. The footage)
handle demand through greater pro- use of space will increase, according to ■ Prior 4 Quarters ■ Next 4 Quarters
ductivity rather than additional workers. 15 percent of respondents, while only 6
Sources: Federal Reserve Bank of Minneapolis and Minnesota Department of Employment
Respondents expect input costs to percent see a decrease. A small North and Economic Development
increase and profits to rise slightly. The Dakota environmental consulting firm
firms see a rebound in their state said it used Small Business Administra-
economies, with higher employment tion loans to finance a new building “in expect employment and consumer expecting higher inflation and only 2
and consumer spending. anticipation of a rebound.” Firms spending to increase slightly. Flat corpo- percent expecting lower inflation over
“Business is tough,” commented a expect employment and profits to stay rate profits are expected. However, the next four quarters. f
small Montana accounting firm. Sales roughly constant and productivity to “inflation will increase in the future,”
Go online to minneapolisfed.org
revenue slid, with 53 percent of firms increase. commented a respondent from a small
for complete survey results.
reporting decreases and 26 percent Respondents’ outlook for their state Minnesota services firm. Many other
reporting increases. Both sales volume economy is somewhat positive. They respondents agreed, with over half

The fedgazette has moved to a


quarterly schedule ( January, April,
July and October) to bring more
focus and resources to the fedgazette
fedgazette online. Look to www.minneapolisfed.org
for enhanced coverage and analysis,
including new types of information and
ways to stay informed about the Ninth
District economy.
fedgazette NINTH DISTRICT OUTLOOK
Page 21
JULY 2010

Despite uncertainty, moderate


economic growth expected
By ROB GRUNEWALD characterized as one observed in data, CHART 2 Conditions for manufacturing firms improving
Associate Economist but not on Main Street. With relatively Business conditions index*
high unemployment rates, 9.7 percent
TOBIAS MADDEN nationally and 7.4 percent in the dis- 100
Regional Economist trict, the thousands of unemployed
workers who are looking for jobs proba- 90
Despite continued economic uncertain- bly don’t consider this a recovery as
ty, including issues regarding government such. However, since employment in the 80
debt levels in Europe and the oil spill in district hit bottom in December of last North Dakota
the Gulf of Mexico, indicators show that year, the picture has improved. Since 70
the Ninth District economy is strengthen- the beginning of the year, the district South Dakota
ing at a moderate pace. The Minneapolis has gained more than 65,000 jobs. 60
forecast models show that this gradual In April, district nonfarm employ-
improvement should continue through ment was down 1 percent compared 50
2010 and into 2011. with a year ago. Construction posted the
District employment levels have largest decrease in employment from a 40
increased moderately, and consumer year ago (–5.1 percent), followed by Minnesota
spending is up. The manufacturing sector manufacturing (–3.1 percent) and 30
has increased output, and home con- information and financial activities
struction has started to pick up. The fore- (–2.5 percent). However, not all sectors 20
cast models predict that these trends will decreased; modest growth was tallied in
continue into next year. In the agricul- professional and business services (0.1 10
ture sector, the spring planting and calv- percent), government (0.5 percent)
ing season benefited from mild weather. and education and health services (1.2 0
2007 2008 2009 2010
Crop prices are expected to remain level, percent) (see Chart 1). As hiring contin-
while some increases are predicted for ues to improve, the recovery will likely *Index numbers above 50 indicate expansion; below 50 indicate contraction.
cattle, hog and milk prices. become more tangible. Source: Creighton University
While manufacturing employment
Moderate employment was down from a year ago, output
turned positive during 2010 in dent by the increase in the number of The data suggest that manufacturers are
growth under way Minnesota and the Dakotas, as shown in hours worked by manufacturing boosting output through longer hours
The economic recovery, which likely survey results released by Creighton employees. Since April 2009, hours instead of hiring new workers. A similar
started by the third quarter of last year University (see Chart 2). The improve- worked increased in all district states trend is beginning to appear among
(July through September), has been ment in manufacturing is also made evi- except Montana (see Chart 3 on page 23). nonfarm workers nationally.
Not only are staff working more
hours per week, but they are producing
more per hour worked. During the first
CHART 1 U.S. and district employment down from last year quarter of 2010, national productivity
Percent change in nonfarm employment compared with a year earlier, April 2010 levels for nonfarm employees increased
more than 6 percent compared with a
year earlier, the largest gain since 2002.
These trends, longer hours combined
Education and Health Services
with productivity gains, are often
Government
observed during an economic recovery.
That is, companies respond to increases
Professional and Business Services in demand by stretching their current
resources while waiting for economic
Natural Resources and Mining conditions to become stable before
making commitments to add staff.
Total Nonfarm Employment When companies start to add
resources, they first turn to temporary
Trade, Transportation and Utilities employees and contract workers. In a
recent Minneapolis Fed survey of tem-
Leisure and Hospitality porary staff firms in Minnesota, North
Dakota and Wisconsin, a large majority
Information and Financial Activities of respondents noted that client vol-
umes and workers placed with clients
Manufacturing increased during 2010 compared with
the same period last year (see related
Construction
story on page 8).
–10 –8 –6 –4 –2 0 2 4
With temporary hires picking up, will
the hiring floodgates open? According
■ Ninth District ■ United States to the Minneapolis Fed’s forecast mod-
Source: Bureau of Labor Statistics els, employment will end 2010 above
Continued on page 22
fedgazette DISTRICT FORECAST
Page 22
JULY 2010

District Forecast

After steep declines in all areas during 2009, nonfarm


employment is expected to grow modestly during 2010.
Growth rates in 2010 are expected to exceed historical
average rates in Minnesota, Wisconsin and the Upper
Peninsula, and remain below historical averages in
Montana and the Dakotas. In 2011, gains in employment
are predicted to continue in all areas, with rates at or
above historical averages in Minnesota, Montana and
the Upper Peninsula.

Unemployment rates are expected to step down from their


high points in 2009 in all areas, except Montana, where
higher rates are anticipated during 2010. However, all
unemployment rates in 2010 will remain at or above
historical averages. In 2011, unemployment rates are
forecast to stay about the same, with slight increases in
Minnesota, Montana and Wisconsin and slight decreases
in the Upper Peninsula and the Dakotas.

During 2010, personal income is expected to grow in all


areas, except North Dakota, where a decrease is forecast.
However, this predicted decrease possibly reflects changes
in farm income, which tends to be volatile. Last year, North
Dakota was the only district state to post an increase in
personal income. In 2011, personal income growth is
expected to pick up somewhat in all states, except South
Dakota, where the pace of personal income growth is
expected to remain the same.

Prospects for housing units authorized are mixed.


Authorizations are expected to increase in Montana and
North Dakota and decrease slightly in South Dakota
and Wisconsin during 2010. After posting an increase in
Minnesota in 2009, authorizations are forecast to turn
negative again in 2010. In 2011, housing units authorized
will increase in South Dakota and decrease slightly in
Montana and North Dakota. Meanwhile, the forecasting
model shows authorizations dropping steeply in Minnesota
and Wisconsin, but these predicted decreases are likely due
to the unusual behavior in current data combined with the
statistical properties of the forecasting model. In Minnesota
and Wisconsin, housing units authorized have not only
dropped sharply during the past few years, but they are
also below levels observed over 30 years ago. Since fore-
casting models typically rely on long-term and recent
trends, it is not surprising that the model points to a
continued drop. At some point, population and market
pressures will likely spur a more sustained demand for
housing, but the Minneapolis Fed’s model, as with
forecasting models generally, will have difficulty predicting
when that turning point will occur.

Outlook from page 21


year earlier levels. However, the pace of els will not reach prerecession peaks Long-term unemploment from 27 percent in May 2009 to 46 percent
hiring will hardly seem like a flood, but until 2013 or beyond, with the excep- in May 2010. The list expanded as declin-
certainly more than a trickle. In tion of North Dakota, which is expected levels high ing employment levels persisted through
Minnesota, Wisconsin and the Upper to return to peak levels by 2011. North Nationally, the number of long-term the relatively long recession. Those who are
Peninsula of Michigan, growth rates will Dakota’s economy has been supported unemployed workers and discouraged unemployed for a long period risk losing
exceed historical averages. In 2011, by an expansion in oil drilling activity workers has increased over the past year. skills due to their absence from the work-
employment will continue to grow and a relatively healthy agriculture The percentage of unemployed who are place, making it more difficult to land a job
across the district, but employment lev- sector. out of work 27 weeks or more increased once hiring picks up.
fedgazette NINTH DISTRICT OUTLOOK
Page 23
JULY 2010

from the forecast models are mixed, the expecting higher income.
CHART 3 Hours worked make a comeback increase in authorizations suggests that Ranchers and farmers enjoyed a mild
Average weekly hours for manufacturing workers home building is no longer scraping spring in 2010. Many ranchers across
April 2007–2010 bottom. the district reported a good calving sea-
44 Residential real estate has picked up. son. The warm spring allowed a smooth
Existing home sales in district states completion of the delayed 2009 harvest
increased 10 percent during the first and early planting across most of the dis-
43
quarter compared with a year ago. Sales trict. Many district crops have emerged
South Dakota
continued to grow into April. However, from the ground earlier than last year
42 it seems likely that the expiring home and earlier than the five-year average.
Minnesota buyer tax credit is driving most of the Crops are also in good condition. This
recent gains. It remains unclear how the increases the odds of a bountiful har-
41
United States housing market will perform post tax vest. In addition, decent soil moisture
Montana credit. levels are evident across most of the
40 Home prices have been soft, with crop-growing regions of the district.
many sales considered distressed (see However, drought conditions intensi-
Wisconsin related story on page 9). However, first fied in northern Wisconsin.
39
North Dakota quarter prices were moderately higher in After crop prices dropped last year,
some district cities, with the exception of the U.S. Department of Agriculture
38 Minneapolis-St. Paul, where prices were 7 expects corn, soybean and wheat
percent lower than a year ago. prices to be relatively stable through
2011. This stability, combined with a
37
2010 looking up for potentially large harvest, could mean
higher farm revenues. Meanwhile, cat-
36
animal producers tle prices have jumped from 2009 lev-
After several good years, 2009 was els and are expected to rise even fur-
mediocre for agriculture as a wet fall ther in 2011. Hog prices also rose in
35
2007 2008 2009 2010
caused the harvest to spill into 2010, 2010 and are expected to remain at
and dairy and livestock producers bat- those levels into 2011. Milk prices
Source: Bureau of Labor Statistics tled low prices and high input costs. The increased from 2009, but are still
first half of 2010 brought new life to below 2008 levels. Expected 2011 milk
The number of discouraged workers, but still positive. The International agriculture; mild weather allowed early prices show an uptick from 2010. The
those who would like a job but are cur- Council of Shopping Centers reported planting and a good calving season. increase in output prices and softening
rently not looking for work because they that revenue growth at stores open at least Meanwhile, 2010 prices for the major of input prices should bode well for
believe no jobs are available for them, a year slowed in April (0.8 percent) and district crops softened, but prices for live- livestock and dairy producers. f
increased 36 percent nationally in May May (2.6 percent). stock and dairy rebounded (see table).
compared with a year earlier. Because Meanwhile, district tourism business-
discouraged workers are not considered es have expressed cautious optimism for
part of the labor force, they are not the summer travel season. For example,
counted as unemployed. However, once the number of nonresident visitors to
they do start looking for a job, they are Montana is expected to increase 2 per- Cattle and hog prices rise
counted as unemployed and place cent compared with 2009, when visitor Average farm prices
upward pressure on the unemployment numbers were flat, according to state Estimated Projected
rate. Even as hiring picks up, as discour- tourism officials. 2007/2008 2008/2009 2009/2010 2010/2011
aged workers enter the workforce, Consumers continue to face tame (Current $ per bushel)
unemployment rates may stay relatively price increases. The April consumer Corn 4.20 4.06 3.45 –3.65 3.30 – 3.90
high for a few years. price index was only 2.2 percent higher Soybeans 10.10 9.97 9.50 8.00 – 9.50
According to the Minneapolis Fed’s than a year earlier. Once prices for food Wheat 6.48 6.78 4.85 4.00 – 4.80
forecasting models, unemployment and energy, which tend to be relatively
rates in the district are expected to edge volatile, are removed, the core index Estimated Projected
lower but remain above historical aver- increased 0.9 percent, the smallest year- 2008 2009 2010 2011
ages for awhile, with the exception, over-year increase since January 1966. (Current $ per cwt)
again, of North Dakota, which is expect- Future consumer spending will bene- All Milk 18.29 12.84 15.75 –16.15 15.80 –16.80
ed to return to its historical average by fit from gains in personal income. After Choice Steers 92.27 83.25 92.00 –96.00 95.00 –102.00
next year. decreasing in 2009, district personal Barrows & Gilts 47.84 41.24 54.00 –57.00 53.00 – 57.00
income is expected to grow in 2010 and
Source: U.S. Department of Agriculture, estimates as of June 2010
Consumer spending into 2011. According to a survey of pro-
fessional services firms (see page 20), 35
growing percent of respondents expect higher
Growth in consumer spending during consumer spending over the next 12
2010 has helped keep the economy months, while 27 percent predict Every quarter, the Minneapolis Fed
moving forward. Auto sales that were declines. surveys agricultural lenders to get views
anemic a year ago are finding a spark on how their customers are performing
once again in 2010. New car registra- Outlook for residential financially. Results from surveys last year
tions increased more than 80 percent in construction and real showed increased concern about prof-
Montana and North Dakota in April its. This trend continued in the first
from a year earlier, while registrations
estate mixed quarter (April 2010) agricultural credit
were up about 15 percent to 20 percent District housing units authorized for the conditions survey, with half of the
in northwestern Wisconsin and the first four months of 2009 were 43 per- respondents seeing decreased agricul-
Upper Peninsula. cent higher than in the same period last tural income. Lenders were less pes-
Sales nationally at major retailers were year. Most of the gains were for authori- simistic about farm profits in the second
softer during April and May compared zations of multifamily units; single-fami- quarter of 2010, with 42 percent expect-
with stronger growth earlier in the year, ly home permits were flat. While results ing lower income and 14 percent
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fedgazette JULY
Page 24
2010

AK
2.4
Percentage Point Change in Unemployment Rates
December 2007 to December 2009
NH 3.5
ME
WA VT 2.7 3.4
4.6
MT ND
2.8 1.3 MA 4.9
MN
OR 2.7 WI NY
5.4 SD 4.0 4.2
ID RI 6.7
5.6 1.9 MI
WY 7.4 CT 2.1
PA
4.7 IA 4.3 NJ 5.5
NE 2.6 OH
NV 1.7 IL IN 5.2 DE 5.0
7.8 5.5 5.1 WV
UT VA MD 3.9
CO 5.0 3.6
3.5 MO KY District of Columbia
3.0 KS
CA 2.5 4.3 5.1 6.4
6.5 NC
6.0
TN
OK 5.2
SC
3.2 AR 6.8
AZ NM 2.6
4.9 4.6 GA
MS AL
7.0 5.2
4.4
LA
HI TX 3.5
3.8 3.8 1.3 to 2.9
FL
7.0
3.0 to 4.4

4.5 to 5.9
Source: Bureau of Labor Statistics
6.0 to 7.8

United States: 5.0