Southeast Minnesota Economic and Business Conditions Report
 

Document Type

Research Study

Publication Date

3-2018

Abstract

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 a quarter in which the LEI was largely unchanged, the first quarter leading index rose by 0.77 points as three index components recorded positive values. Increased new filings of incorporation and LLC in the Southeast Minnesota planning area, a rise in the Minnesota Business Conditions Index, and an improvement in consumer sentiment helped lift this quarter’s LEI. A lower number of residential building permits in the Rochester area and higher initial jobless claims in Southeast Minnesota weighed on this quarter’s leading index.

There were 1,004 new business filings with the Office of the Minnesota Secretary of State in Southeast Minnesota in the first quarter of 2018 — representing a 7.7 percent increase from one year ago. 64 new regional business incorporations were filed in the first quarter, an 8.6 percent reduction from prior year levels. At a level of 643, first quarter new limited liability company (LLC) filings in Southeast Minnesota were 9.9 percent higher than the first quarter of 2017. With 246 filings, new assumed name activity was unchanged from the same quarter last year. There were 20 more new filings (representing a 64.5 percent increase) for Southeast Minnesota non-profit over the last three months compared to one year earlier.

Sixty-three percent of new business filers in the Southeast Minnesota planning area completed the voluntary Minnesota Business Snapshot (MBS) survey in this year’s first quarter. Results of this voluntary survey indicate that 5.4 percent of new filers come from communities of color and 7.3 percent are veterans. Only 2.1 percent of new filers come from the disability community and 4.5 percent of new filings are made by the immigrant community. Thirty-six percent of new business filings in Southeast Minnesota in this year’s first 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 60 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, construction and other services. Employment levels at most new firms are between 0 and 5 workers, and more than 50 percent of those starting a new business consider this a part-time activity.

Employment of Southeast Minnesota residents rose by 2 percent over the year ending March 2018. The regional unemployment rate was 3.5 percent in March, well below the 3.9 percent level recorded one year earlier. Initial claims for unemployment insurance in March 2018 rose by 7 percent from one year earlier and the Southeast Minnesota labor force increased by 1.5 percent. The job vacancy rate in Southeast Minnesota is at historic levels. For every 100 unemployed workers in the region, there are 158.47 job vacancies. The planning area’s annual bankruptcies are starting to increase.

Data from the Rochester area—the largest market in Southeast Minnesota—were mixed. A small increase in overall employment (and a larger increase in manufacturing employment), increased average hourly earnings, a lower unemployment rate, a larger labor force, higher overall new business filings, 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, a lower valuation of residential building permits, and flat average weekly work hours.

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