Southeast Minnesota Economic and Business Conditions Report
 

Document Type

Research Study

Publication Date

1-2016

Abstract

Southeast Minnesota business conditions are expected to soften over the next several months according to the most recent prediction of the Southeast Minnesota Index of Leading Economic Indicators (LEI). After a quarter in which the LEI expanded by 10.82 points, this quarter’s leading index fell by 11.23 points as four of five index components turned negative. The LEI is now 10.2 percent lower than it was last year at this time. A fall in quarterly residential building permits in the Rochester area, a recent decline in consumer sentiment, weakness in the Minnesota Business Conditions Index (which serves as a general measure of state business conditions), and rising quarterly claims for unemployment benefits served as a drag on the third quarter LEI. Higher new business filings were the one index component that contributed favorably to this quarter’s outlook. There can be considerable variation in the LEI from one quarter to the next, so the prediction of a softening economy could easily be reversed as new data come in. A variety of current measures of economic performance in Southeast Minnesota suggest regional activity may have recently improved.

There were 804 new business filings with the Office of the Minnesota Secretary of State in Southeast Minnesota in the third quarter of 2015 — representing a 5.1 percent improvement from one year ago. There were 69 new regional business incorporations in the third quarter, a 6.8 percent fall from year ago levels. Third quarter new limited liability company (LLC) filings in Southeast Minnesota surged by 11.8 percent (to a total of 494) compared to last year’s third quarter. New assumed names totaled 198 in this year’s third quarter—a decrease of 6.6 percent from the same quarter in 2014. There were 43 new filings for Southeast Minnesota non-profits over the three months ending September 2015— six more filings than one year ago.

Employment of Southeast Minnesota residents increased by 0.5 percent over the year ending September 2015. Compared to September 2014, 1,378 more residents of Southeast Minnesota now have jobs. The regional unemployment rate was 2.8 percent in September, an improvement from 3.1 percent in the year earlier period. Initial claims for unemployment insurance in September 2015 were considerably lower than one year ago. The Southeast Minnesota labor force expanded by 0.2 percent over the past twelve months. The Rochester area rate of job vacancies per 100 unemployed surged in this year’s second quarter.

Data from the Rochester area—the largest market in Southeast Minnesota—were mixed, with a small increase in overall employment, a longer length of the workweek, a lower unemployment rate, a reduction in initial jobless claims, and higher new business filings having a positive impact on the outlook. On the negative side was a smaller labor force, flat average hourly earnings, lower manufacturing employment, and a small decline in the value of residential building permits.

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