The Federal Reserve Bank of Minneapolis gathers economic intelligence through two advisory councils representing diverse sectors across the Ninth District, which includes Montana, North Dakota, South Dakota, Minnesota, parts of northwestern Wisconsin, and Michigan’s Upper Peninsula. These groups—the Ninth District Advisory Council (NDAC) and the Community Depository Institutions Advisory Council (CDIAC)—offer frontline perspectives on regional economic trends, helping inform monetary policy decisions at a time when inflation control and labor market dynamics remain in delicate balance.
CDIAC members highlighted ongoing difficulties in the housing sector, citing limited supply, rising construction expenses, and workforce shortages. Costs for essential materials such as steel and lumber have climbed, complicating efforts to build homes that align with appraisal values. These financial pressures are compounded by trade-related policies affecting material imports. In rural areas, competition for skilled labor has intensified, particularly with data center developments drawing away tradespeople. Child care availability continues to hinder workforce participation, especially in agriculture, construction, and service industries.
Consumer sentiment remains generally steady, though agricultural regions express concern due to low commodity prices and uncertain trade conditions. Despite elevated living costs, households continue spending, increasingly relying on credit tools. Financial institutions report surges in credit card use, personal loans, home equity borrowing, and long-term auto financing—some up to 96 months. One lender noted home equity lending volumes are two to three times above typical levels. Such patterns suggest many individuals may be under financial strain.
Small business loan demand remains strong, with one institution surpassing its annual growth forecast early in the year. However, tourism-dependent enterprises face headwinds, particularly smaller hotels and restaurants, as visitor numbers decline. This downturn affects border communities and hospitality providers more severely than high-end establishments. Mortgage activity surged during the summer, driven by pent-up demand in a constrained housing market. Borrowers are closely monitoring interest rates, poised to refinance if long-term mortgage rates decline.
NDAC participants emphasized that tariffs and global trade disruptions are disproportionately affecting manufacturers and construction firms reliant on international supply chains. Rising input costs and logistical complexities are prompting some large builders to plan workforce reductions later this year. Retail foot traffic has weakened, placing additional pressure on small merchants adapting to shifting consumer habits.
Labor markets remain tight in specific fields like health care and construction, despite an overall cooling job environment. Wage growth has slowed, and employee turnover has decreased. Reduced immigration is cited as a growing challenge across multiple sectors, including technology, farming, and manufacturing. On technology adoption, larger firms are integrating automation and artificial intelligence into operations, while smaller organizations face obstacles due to cost, time constraints, and governance issues.
These firsthand accounts provide valuable context for Federal Open Market Committee members as they navigate the dual mandate of achieving price stability and supporting maximum employment. The insights complement official statistics, offering nuanced, real-world data that enrich the policymaking process.
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Regional economic insights in an evolving landscape
The Federal Reserve Bank of Minneapolis convenes and maintains multiple advisory groups to gain insights into the Ninth District’s economy. Each advisory group has a specific focus, and group members represent private businesses, financial institutions, and community organizations from across the Ninth District, which is composed of Montana, North Dakota, South Dakota, Minnesota, 26 counties in northwestern Wisconsin, and the Upper Peninsula of Michigan. n nMembers of the Ninth District Advisory Council (NDAC) represent a variety of industries. This group advises the Bank on regional economic conditions. The Community Depository Institutions Advisory Council (CDIAC) advises the Bank on conditions affecting community banks and consists of leaders of thrifts, credit unions, and banks with assets of less than $10 billion. n nMinneapolis Fed President Neel Kashkari spoke to the groups this fall about the challenges he and his colleagues on the Federal Open Market Committee face with a dual mandate in tension. They are working to return inflation to the Fed’s 2 percent target, while balancing the labor market’s changing landscape. Council members shared their insights into current conditions in housing, labor markets, credit, and consumer confidence. n nCDIAC recap of current conditions n nThe housing market across the Ninth District continues to face challenges due to tight inventory, rising costs, and labor shortages in the construction industry. CDIAC members noted tariff and trade policies are impacting the housing market. Building materials like lumber and steel are increasing in cost, making it more challenging to build new homes that will match appraisal values. n nMeeting participants reported labor availability remains a challenge in the district. It is not quite as acute in higher-wage white collar occupations. Labor supply for agriculture, construction, and the service industry was noted as a pain point, with a lack of child care being a contributing factor. There is frustration in rural parts of the district with data centers under construction as those projects seem to absorb all the skilled tradespeople in the area. n nMembers noted consumer confidence is stable in most areas of the district. However, those in agricultural markets reported that low commodity prices and trade uncertainty are impacting confidence. Overall, members said that while consumers are impacted by higher prices, many are still making purchases. Participants reported an increase in credit card usage, personal loans, home equity lending, and auto loans of up to 96 months. One financial institution reported that their home equity lending is two to three times higher than normal. Members voiced widespread concern that these borrowing trends are indicative of consumers struggling to make ends meet. n nParticipants reported strong demand for small business loans. One financial institution had already exceeded their annual growth expectations. Another financial institution discussed concerns about the decrease in tourism, impacting small businesses reliant on a strong tourism season. The sluggish tourism season impacted borrowers who run smaller hotels and restaurants more than higher-end businesses that are better positioned to weather the downturn. n nMortgage activity across financial institutions was quite active throughout the summer months, with participants noting that the tight housing market created a backlog of borrowers looking to purchase a home. Customers are watching interest rates closely and are ready to refinance mortgages once the long-term mortgage rates go down. n nMore insights from district businesses n nMembers of the NDAC reported tariffs and trade are having an outsized impact on the business community, and many industries are expecting slower growth for the remainder of the year. Manufacturing and construction firms that leverage global supply chains reported that input costs are increasing due to tariffs, which has added complexity to logistics and production and tracking. Large construction firms are planning for layoffs later in the year due to stalled projects. n nNDAC members reported a decrease in foot traffic in retail stores, with small businesses struggling to stay afloat due to changing consumer behavior and purchasing habits. As mentioned in the CDIAC meeting, Canadian travel and general tourism across the district is also down, impacting small businesses in or adjacent to border communities and in the hospitality industry. n nParticipants reported that, despite recent softening, labor markets are tight across some industries, with health care and construction reporting the biggest challenges recruiting enough talent to meet demand. Wage inflation has decreased significantly, and many reported seeing lower turnover as the job market is cooling. Members discussed decreased immigration as a challenge for the hospitality, agriculture, information technology, construction, and manufacturing sectors. n nCouncil members discussed automation and artificial intelligence. Large businesses reported making greater use of new technologies; small businesses expressed more uncertainty in how to implement them into their workflow. The expense and governance of adopting new technologies is a barrier for smaller businesses, which don’t have the time or resources to fully explore emerging technologies. n nHelping monetary policy n nFederal Open Market Committee members continue to work to bring inflation back to its 2 percent target while balancing a changing labor landscape. Insights from these two advisory groups provide real-time, ground-level perspectives to complement the hard data. These insights supplement existing data sources and ensure multiple perspectives are represented in the monetary policymaking process.