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Research Study

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Steady economic growth over the next several months is expected in the Southeast Minnesota planning area according to the prediction of the Southeast Minnesota Index of Leading Economic Indicators (LEI). After two consecutive quarterly declines in the LEI, the fourth quarter leading index rose by 1.18 points as two index components recorded positive values. Increased new filings of incorporation and LLC in the Southeast Minnesota planning area and an improvement in consumer sentiment helped lift this quarter’s LEI. A lower number of residential building permits in the Rochester area and a decline in the Minnesota Business Conditions Index (which serves as a general measure of statewide business conditions) weighed on this quarter’s leading index.

There were 844 new business filings with the Office of the Minnesota Secretary of State in Southeast Minnesota in the fourth quarter of 2017 — representing a 5.8 percent increase from one year ago. There were 47 new regional business incorporations in the fourth quarter, a 27.7 percent reduction from prior year levels. At a level of 528, fourth quarter new limited liability company (LLC) filings in Southeast Minnesota were 7.1 percent lower than the fourth quarter of 2016. With 228 filings, new assumed name activity was 11.7 percent greater than the same quarter last year. There were 6 more new filings for Southeast Minnesota non-profit over the last three months compared to one year earlier.

Fifty-nine percent of new business filers in the Southeast Minnesota planning area completed the voluntary Minnesota Business Snapshot (MBS) survey in this year’s fourth quarter. Results of this voluntary survey indicate that 7.8 percent of new filers come from communities of color and 8.2 percent are veterans. Only 1.4 percent of new filers come from the disability community and 4.8 percent of new filings are made by the immigrant community. Forty-two percent of new business filings in Southeast Minnesota in this year’s fourth 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 49 new filers have revenues in excess of $50,000). The most popular industries for new businesses in Southeast Minnesota are retail trade, real estate/rental/leasing and other services. Employment levels at most new firms are between 0 and 5 workers, and nearly 50 percent of those starting a new business consider this a part-time activity.

Employment of Southeast Minnesota residents rose by 2.3 percent over the year ending December 2017. The regional unemployment rate was 2.9 percent in December, considerably lower than the 3.6 percent level recorded one year earlier. Initial claims for unemployment insurance in December 2017 declined by 4.7 percent from one year earlier and the Southeast Minnesota labor force increased by 0.4 percent. The third quarter average weekly wage rose slightly over its level one year ago despite a statistical anomaly that caused all other planning areas’ average weekly wages to fall. The planning area’s annual bankruptcies stabilized at an historically low level.

Data from the Rochester area—the largest market in Southeast Minnesota—were weaker than in recent quarters. A small increase in overall employment, increased average hourly earnings, a lower unemployment rate, and declining initial jobless claims favorably impacted the city’s outlook. On the negative side was a year-over-year decline in education/health sector employment, unchanged overall business filings, a lower valuation of residential building permits, and declining average weekly work hours.



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