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Minneapolis Retailers Association - A u g u s t 12, 1965 O ne of the i n j u n c t i o n s p a s s e d on to me by a f o r m e r P r e s i d e n t of the M i n n e a p o l i s B a n k w a s to a v o i d m a k i n g s h o r t - r u n p r e d i c t i o n s . right, the fact will be fo r g o t t e n ; and if you are wrong, If you are the n u m b e r of i n t e r v e n i n g f a c t o r s that can be b l a m e d are u n f o r t u n a t e l y few. However, h a v i n g b e e n a s s i g n e d a s p e c i f i c topic, w h i c h r e q u i r e s a s p e c i f i c p r o j e c t i o n , I h a v e no choice. As a g e n eral statement, r e t a i l e r s can take c o n s i d e r a b l e c o m f o r t f r o m the p r o s p e c t s f or the fall. re t a i l season. It looks as th o u g h it is g o i n g to be a good B e f o r e g oing into a d i s c u s s i o n of w h y this m a y be so, I w o u l d like to ma k e two caveats. the i n t e r n a t i o n a l scene. B o t h of these have to do w i t h e l e m e n t s of First, on the m o n e t a r y side, w h e r e the p r o b l e m s of G r e a t B r i t a i n and o u r own i n t e r n a t i o n a l b a l a n c e of p a y m e n t s c o n t i n u e to give concern. The l a t t e r p r o b l e m h as improved, at least in the short run, w i t h a su r p l u s p r o j e c t e d for the second q u a r t e r at an a n n u a l rate of sixt e n t h s of a b i l lion, the first in fifteen quarters. U n f o r t u n a t e l y , the m e a s u r e s t a k e n by the B r i t i s h G o v e r n m e n t to solve t h e i r p r o b l e m have not had the same d e g r e e of success, and the c o n c e r n continues. is V i e t Nam. The second, of course, I m e n t i o n these two o n l y b e c a u s e it is i m p o r t a n t to e m p h a s i z e the fact that we are m e m b e r s of a w o r l d c o m munity, a n d w h a t h a p p e n s in it wil l a f f e c t the c o n d i t i o n of o u r regio n a l community. But b a c k to the regional c o m m u n i t y . The r e a sons f o r a p r o j e c t i o n are m o r e i m p o rtant than the p r o j e c t i o n itself, for they h e l p the l i s t e n e r m a k e up his m in d as to the w e i g h t to be a t t a c h e d to the p r o j e c t i o n . The two m o s t i m p o r t a n t e l e m e n t s are the n u m b e r s of p e ople em p l o y e d , a n d the a m o u n t of inc o m e they have to spend. projection, In o r d e r to m a k e c o n c r e t e the b a s i s for the some r e c o u r s e has to be m a d e to numbers. I will try to k e e p t h e m to a m i nimum, but the y are the stuff f r o m w h i c h e c o n o m i c p r o j e c t i o n s are made. The first is to p e r s o n a l income. Personal income is the p r i m a r y f a c t o r in d e t e r m i n i n g the v o l u m e of c o n s u m e r e x p e n d i t u r e s and of retail sales. The A m e r i c a n p e o p l e in past y e a r s have spent f r o m 92 to 93 per cent of t h e i r d i s p o s a b l e income -- that is, total p e r s o n a l income a f t e r p e r s o n a l taxes. In the first q u a r t e r of this year, the A m e r i c a n p e o p l e spent w e l l o v e r 93 p e r cent of t h e i r d i s p o s a b l e income, a l a rger p r o p o r t i o n than w as spent in a n y time since the t hird q u a r t e r of 1963. 93 p e r cent range, it soon swings back. W h e n s p e n d i n g e x c e e d s the 92 to It did rec e d e in the second q u a r t e r of 1965 and m a y c o n t i n u e to d r o p m o r e in the latter h a l f of the year. How ever, a c t i o n t aken by the federal g o v e r n m e n t m a y o f f s e t any d e c l i n e in total e x p e n d i t u r e s by d i r e c t l y or i n d i r e c t l y i n c r e a s i n g d i s p o s a b l e income. The e x c i s e tax cut and the s tep-up in social s e c u r i t y p a y m e n t s will p r o v i d e m o r e p u r c h a s i n g p o w e r for the public. The in c r e a s e in p u r c h a s i n g p o w e r of o l d e r p e o p l e as a result of larger social s e c u r i t y p a y m e n t s is e x p e c t e d to sti m u l a t e the p u r c h a s e s of soft goods. The a g g r e g a t e a m o u n t of p e r s o n a l income (and, thus, the p o t e n t i a l b u y i n g power) is c l o s e l y r e l a t e d to the n u m b e r of i n d i v i d u a l s at w o r k in this m e t r o p o l i t a n area. E m p l o y m e n t in J u l y t o t a l e d about 6 3 7 ,000, u p by m o r e than 2 5 , 0 0 0 f r o m the total in July, September, months, 1964. The m o n t h l y i n crease in e m p l o y m e n t since 1964 has b e e n 3 pe r cent o r m o r e f r o m a y e a r earlier. it has b e e n a l m o s t 4 p e r cent, i n d i c a t i n g an e x c e p t i o n a l l y rapid expansion. - In recent 2 - As I will show in a m o m ent, n u m b e r of pers o n s employed. there has b e e n a true i n c r e a s e in the A p a r t f r o m this, there h as b e e n an o v e r - a l l i n c r e a s e in p a y r o l l s be c a u s e of an incr e a s e in o vertime. In T w i n Cities m a n u f a c t u r i n g plants, a v e r a g e w e e k l y h o u r s w o r k e d since the fi r s t of the y e a r has ranged f r o m s l i g h t l y u n d e r 41 to 42 hours. wa s the longest a v e r a g e w o r k w e e k since O c tober, The 42 h o u r s in June 1952, w h e n i n d u s t r i a l p r o d u c t i o n w a s v e r y h i g h b e c a u s e of the K o r e a n W a r demands. Average weekly e a r n i n g s in T w i n Ci t i e s m a n u f a c t u r i n g p l a n t s rose to a n e w h i g h of $ 1 2 1 . 1 7 in June. Income d e r i v e d fro m o v e r t i m e is o f t e n u s e d to p u r c h a s e the e x t r a s w h i c h boo s t s total retail sales. T h e r e is still a d e mand f o r s k i l l e d help. P e r h a p s one of the best c l u e s to labor d e m a n d is the h e l p w a n t e d a d v e r t i s i n g . The d e m a n d f or an i n c r e a s i n g n u m b e r of skills in r e l a t i o n to the a v a i l a b l e su p p l y of such l a bor has been rising, a c c o r d i n g to the i n c r e a s i n g v o l u m e of such a d v e r t i s i n g a p p e a r i n g in the M i n n e a p o l i s - S t . Paul n e w s p a p e r s , as well as in the o t h e r s t an d a r d m e t r o p o l i t a n n e w s p a p e r s in the Ninth District. I n dexes ha v e b e e n c o m p i l e d on the n u m b e r of h e l p w a n t e d ads and on the total lines in such ads since January, 1959. The i n d e x of h e l p w a n t e d ad count has bee n at a record h i g h d u r i n g the first six m o n t h s of 1965. A s c o m p a r e d w i t h the fi r s t ha l f of 1964, the in c r e a s e in the i n d e x this y e a r has ranged f r o m 14 p er cent to 31 p er cent. The i n d e x on the total n u m b e r of lines in these ads has r i s e n to a h i g h e r level than on the ad count, i n d i c a t i n g that the ads have b e c o m e longer, a p p a r e n t l y g i v i n g m o r e d e s c r i p t i o n of the skills wanted. As c o m p a r e d w i t h the fir s t hal f of 1964, the i n c r ease in the in d e x this y e a r has ranged f r o m 26 p er cent to 40 pe r cent. - 3 - B o t h inde x e s on ad count and on ad lines have r i s e n to a b o u t the same level in the o t h e r f o u r stan d a r d m e t r o p o l i t a n c e n t e r s as in M i n n e a p o l i s St. Paul. The o t h e r c e n t e r s include B i l l ings, Duluth, F a r g o - M o o r h e a d , a n d G r e a t Falls. F u r t h e r m o r e , no s i g n i f i c a n t d i f f e r e n c e s are o b s e r v e d b e t w e e n the rise in the indexes for the Nin t h D i s t r i c t and for the nation. It a p p e a r s that an i n c r e a s i n g n u m b e r of s killed w o r k e r s have b e c o m e scarce in all r e g i o n s of the U n i t e d States. Th ere is a cl o s e r e l a t i o n s h i p b e t w e e n retail sales in the Twin C i ti e s a n d the trends in p u r c h a s i n g p o w e r t h r o u g h o u t the District. This, of co u r s e d r o p s as the d i s t a n c e f r o m the m e t r o p o l i t a n a r e a i n creases, but n e v e r t h e l e s s as a g e n e r a l i z a t i o n , it m a y be said that the level of p r o s p e r i t y in the D i s t r i c t is r e f l e c t e d in some m e a s u r e in retail sales in the T w i n Cities. T h e r e h ave bee n a n u m b e r of d e v e l o p m e n t s in that part of the D i s t r i c t s u b s t a n t i a l l y t r i b u t a r y to the Twi n C i t i e s w h i c h w i l l h e l p s upport retail sales: the i mpetus g i v e n the t a c o n i t e i n d u s t r y by the t a c o n i t e amendm e n t ; the r e n e wed i n t erest in the c o p p e r i n d u s t r y in the U p p e r Penins u l a ; but p e r h a p s the m o s t i m p o r t a n t is the i m p r o v e m e n t in the a g r i c u l t u r a l sector. L i v e s t o c k prices have a d v a n c e d m a t e r i a l l y , w h i c h has i m p r o v e d the p u r c h a s i n g p o w e r of the farmer. F a r m crop r a t i n g s have b e e n " g o o d 1 to " e x c e l l e n t " . 1 The y i e l d s on small g r ai n s w e r e g e n e r a l l y goo d in m o s t areas, a l t h o u g h in a f e w se c t i o n s of M i n n e s o t a and in s o uth central S outh Dakota, i n a d e q u a t e m o i s t u r e was r e p o r t e d and in a few others, e x c e s s i v e m o i s ture. W a r m w e a t h e r in the l a t t e r h al f of J u l y a c c e l e r a t e d the g r o w t h of corn a n d soybeans, p l a n t e d late b e c a u s e of the cold, w et spring, t h e r e b y m a k i n g an e n c o u r a g i n g r e c o v e r y In late J u l y m o s t c o u n t y e x t e n s i o n a g e n t s reported that these two c rops w e r e a b o u t a w e e k or 10 days l ater th a n normal. W h i l e the i n c r e a s e s in the p r i c e s for l i v e s t o c k hav e a d v a n c e d s u b s t a n t i a l l y f r o m the fall of 1964, t h e i r impact on p u r c h a s i n g p o w e r h a s a h i s t o r i c lag b e c a u s e m a r k e t i n g s a nd cash wi l l not o c c u r in s u b s t a n t i a l n u m b e r s until fall. T h i s will s u p p l y c o n t i n u e d su p p o r t to the retail ma r k e t , h o wever, a n d s h ould cause a s u b s t a n t i a l l y h i g h level to c o n t i n u e t h r o u g h the next six months. It is w i t h some reli e f I leave the s h o r t - t e r m p r o s p e c t s , and tu r n to the l o n g - t e r m pros p e c t s . Here it is e a s i e r to g e n e r a l i z e w i t h less f e a r of c o n t r a d i c t i o n , b e c a u s e of the incre a s e in the n u m b e r of v a r i a b l e s . T he l o n g - t e r m o u t l o o k is favorable. E m p l o y m e n t is g o i n g to c o n t i n u e to e x p and, a c c o r d i n g to p r o j e c t i o n s m a d e in the U p p e r M i d w e s t E c o n o m i c Studies, at an annual rate of 2.08 pe r cent f r o m 1960 to 1975, as c o m p a r e d w i t h an a n n u a l rate of o n l y 1.89 per cent f r o m 1950 to 1960. H e n n e p i n County, a c c o r d i n g to a p r o j e c t i o n made by the T w i n Cities M e t r o p o l i t a n P l a n n i n g C o m m i s s i o n , wil l e x p e r i e n c e a p o p u l a t i o n incr e a s e of a b o u t 1 6 2 , 0 0 0 f r o m 1970 to 1980, b r i n g i n g the total to 1,180,500. This is a gai n e x p e c t e d to e x c e e d that of a n y one of the o t h e r f o u r c o u n t i e s in this m e t r o p o l i t a n area. A f ew of the v a r i a b l e s that c ould a l t e r the e v e n p r o g r e s s t o w a r d s t his rosy future are: the p o s s i b i l i t y of a s l o w - d o w n in the b a sic steel i n d u s t r y b e c a u s e of an i n v e n t o r y l i q u i d a t i o n f o l l o w i n g s e t t l e m e n t of the t h r e a t e n e d labor strike. T h e r e has b e e n a rise in i n s t a l l m e n t credit, w h i c h m i g h t p o int to a s l o w - d o w n in the p u r c h a s e of n e w cars in e a r l y 1966. F a i l u r e to find s a t i s f a c t o r y s o l u t i o n s to o u r i n t e r n a t i o n a l m o n e t a r y p r o b lems, could be d a m p e n e r s , as c ould an e x p a n s i o n of the Viet Nam war. Th e e f f e c t to be g i v e n t hese v a r i a b l e s d e p e n d s u p o n the d e g r e e of y o u r n a t i v e o p t i m i s m o r pessimism. There is a d a n g e r in o v e r l o o k i n g some of these s h o r t - r u n fact o r s , e v e n t h o u g h the l o n g - r u n m a y be promising. the late M a y n a r d Keynes, I a m r e m i n d e d of the r e tort m a d e by the fa m o u s B r i t i s h e c o n o m i s t , to a point of re f u g e c l a i m e d by one of h is critics, w h o sought to m i n i m i z e the impact of his s t a t e m e n t c o n c e r n i n g s h o r t - r u n d e v e l o p m e n t s by saying, "Aft e r all, these are o n l y s h o r t - r u n factors, a nd in the long run they wi l l all s m o o t h o u t . 1 1 " Yes" said Mr. Keynes, nbut in the long run we ' l l all be dead . " We mu s t not b l i n d o ur eyes to the fact that t hese larger p r o b l e m s do i m p i n g e u p o n our o wn area, an d s o l u t i o n s to the m mu s t be a c t i v e l y sought if the in d i v i d u a l b u s i n e s s m a n a g e r s in this room, as i n d i v i d u a l s , are to e n j o y these long-run, a d m i t t e d l y b u l l i s h projec t i o n s .
@FedFRASER