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Research Study

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Despite a decline in the Southeast Minnesota Index of Leading Economic Indicators (LEI), strong economic fundamentals are expected to continue to drive positive economic performance in the southeast portion of the state over the next several months. After a quarter in which the LEI fell by 1.25 points, the third quarter leading index contracted by 8.11 points as several index components recorded negative values. A rise in initial claims for unemployment benefits, a smaller number of residential building permits in Rochester, decreased new filings of incorporation and LLC in the Southeast Minnesota planning area, and a decline in the Minnesota Business Conditions Index (which serves as a general measure of statewide business conditions) all weighed on this quarter’s leading index.

There were 792 new business filings with the Office of the Minnesota Secretary of State in Southeast Minnesota in the third quarter of 2017 — representing a 3.5 percent decrease from one year ago. There were 53 new regional business incorporations in the third quarter, an 18.5 percent reduction from prior year levels. At a level of 461, third quarter new limited liability company (LLC) filings in Southeast Minnesota were 11.2 percent lower than the third quarter of 2016. With 231 filings, new assumed name activity was 16.7 percent higher than the same quarter last year. There were 8 more new filings for Southeast Minnesota non-profits over the last three months compared to one year earlier.

Sixty percent of new business filers in the Southeast Minnesota planning area completed the voluntary Minnesota Business Snapshot (MBS) survey in this year’s third quarter. Results of this voluntary survey indicate that 6.3 percent of new filers come from communities of color and 7.1 percent are veterans. Almost 3 percent of new filers come from the disability community and 4.2 percent of new filings are made by the immigrant community. Forty-six percent of new business filings in Southeast Minnesota in this year’s third quarter were initiated by women. MBS results also show that most new business filers in Southeast Minnesota have between 0 and $10,000 in annual gross revenues (although 41 new filers have revenues in excess of $50,000). The most popular industries for new businesses in Southeast Minnesota are construction, retail trade, professional/scientific/technical and other services. Employment levels at most new firms are between 0 and 5 workers, and 50 percent of those starting a new business consider this a part-time activity.

Employment of Southeast Minnesota residents rose by 2.2 percent over the year ending September 2017. The regional unemployment rate was 2.6 percent in September, lower than the 3.2 percent level recorded one year earlier. Initial claims for unemployment insurance in September 2017 declined by 17.8 percent from one year earlier and the Southeast Minnesota labor force increased by 1.5 percent. The job vacancy rate remains elevated in Southeast Minnesota and the planning area’s annual bankruptcies increased slightly.

Data from the Rochester area—the largest market in Southeast Minnesota—were very favorable, with an increase in overall employment (along with employment growth in the key health/education sector), a rise in the value of residential building permits, a lower unemployment rate, a growing labor force, longer weekly work hours, and increased hourly earnings having a positive impact on the outlook. On the negative side was lower overall new business filings (including lower new incorporations and LLCs).



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