Despite heightened uncertainty from recent retail store closings, looming national tariff policies and the future closure of Electrolux, area firms continue to report strong optimism about future business activity. Area firms reported continuing difficulty attracting qualified workers, which appears to be restraining local employment growth. Local employment grew at a tepid 0.4 percent rate over the year ending April 2018 as worker shortages limit firms' growth potential. The manufacturing, education/health, wholesale trade, and transportation/warehousing/utilities sectors led local job growth, while the retail trade, mining/logging/construction, and leisure/hospitality sectors' employment contracted.
A new St. Cloud Index of Leading Economic Indicators is unveiled this quarter (see accompanying chart). The index increased 3.2 percent in April, pointing to continuing local economic growth over the next several months. Surveyed firms indicate strong current employment activity and improving national business conditions. Firms also report an increase in prices received.
1) Private sector payroll employment in the St. Cloud area rose by 0.2 percent from one year earlier in the 12 months through April 2018. Service providing industries (which account for 80.2 percent of local payrolls) are estimated to have had no employment change over the past year. This is largely attributed to a year-over-year decline in employment in the retail trade and leisure/hospitality sectors of the local economy. Employment in these two sectors contracted by 4.2 percent and 9.5 percent, respectively, over the year ending April 2018. Combined, these two sectors account for nearly 20 percent of local jobs. The unemployment rate in the St. Cloud area in April fell to 3.3 percent from 3.7 percent a year ago. This is the lowest April unemployment rate since 2000. The labor force rose by 3 percent in the St. Cloud area over the past year.
2) Employment in the health and educational sector grew by 3.3 percent over the year ending April 2018. As has been noted in previous reports, this sector now accounts for 20.5 percent of area employment (versus 13.9 percent in April 2000). Annual local job growth in the wholesale trade sector was 3 percent and manufacturing employment is estimated to have increased by 3.8 percent over the last twelve months (we note the irony that Electrolux has been hiring workers in recent weeks in an effort to reach increased production goals). Job growth in the transportation/warehousing/utilities sector was 4.2 percent and government sector employment rose by 1.9 percent over the past year. Sectors experiencing job gains represented nearly 69 percent of area employment over the past year. In addition to the loss of jobs in the retail trade and leisure/hospitality sectors that are referenced above, the mining/logging/construction sector (most of this sector is construction locally) shed 1.7 percent of its jobs over the past year. This had recently been one of the fastest growing local sectors, so we will keep an eye on these numbers in the coming months.
3) The new St. Cloud Index of Leading Economic Indicators rose 3.2 percent in April and the St. Cloud 13 Stock Price Index fell 6.2 percent over the three months ending April 30, 2018. Over this same period, the S & P 500 fell 1.9 percent.
4) The future outlook of those area businesses responding to the St. Cloud Area Business Outlook Survey is solid. Fifty-one percent of surveyed firms expect an increase in business activity over the next six months, while only 12 percent expect decreased activity. Forty-one percent of surveyed firms expect to expand payrolls by November and 56 percent anticipate higher employee compensation. Most readings from the future outlook survey are stronger than one year ago, with particularly strong performance of the employment, national business activity, prices received and worker shortage indexes. Forty-two percent of surveyed firms expect increased difficulty attracting qualified workers by November.
5) Forty-one percent of surveyed firms expect to be either directly or indirectly unfavorably impacted by the imposition of tariffs by the Trump administration. Another 41 percent expect "no effect" of the tariffs and only 9 percent of firms thlnk this will favorably impact them. In a second special question, 70 percent of surveyed firms expect "neither net gain nor loss" from an expansion of the Northstar Corridor Commuter Rail service from Big Lake to St. Cloud. Seventeen percent of firms expect to receive a net gain from the expansion of this service, while seven percent would expect a net loss. In this quarter's final special question, we asked area firms to express their concerns about the recent wave of store closings to hit the St. Cloud area. Forty-five percent of firms express a small concern and 36 percent have a medium concern. This is a large concern for 14 percent of surveyed companies.
Banaian, King and MacDonald, Richard A., "Central Minnesota Economic and Business Conditions Report Vol. 20 No. 2" (2018). St. Cloud Area Quarterly Business Report. 78.