Southeast Minnesota Economic and Business Conditions Report
 

Publication Title

Southeast Minnesota Economic and Business Conditions Report

Document Type

Research Study

Publication Date

6-13-2019

Financial Year

2018

Abstract

Solid 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). The leading index rose by 3.33 points in the third quarter as four index components recorded positive values. An increase in the number of Rochester area residential building permits and fewer initial jobless claims helped drive the LEI higher in the third quarter. In addition, an improvement in consumer sentiment and an increase in new filings of incorporation and LLC also made a favorable impact on the leading index. The Minnesota Business Conditions was the only index component to weigh negatively on the LEI in the third quarter.

There were 880 new business filings with the Office of the Minnesota Secretary of State in Southeast Minnesota in the third quarter of 2018 — representing an 11.1 percent increase from one year ago. 49 new regional business incorporations were filed in the third quarter, 7.5 percent fewer filings than prior year levels. At a level of 583, third quarter new limited liability company (LLC) filings in Southeast Minnesota were 26.5 percent higher than in the third quarter of 2017. With 208 filings, new assumed name activity was 10 percent below what was seen in the same quarter last year. There were seven fewer new filings for Southeast Minnesota non-profit over the last three months compared to one year earlier.

Sixty-one 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 7.8 percent of new filers come from communities of color and 6.7 percent are veterans. Only 2.6 percent of new filers come from the disability community and 4.7 percent of new filings are made by the immigrant community. Forty-three 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 45 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 one-half of those starting a new business consider this a part-time activity.

Employment of Southeast Minnesota residents declined by 0.3 percent over the year ending September 2018. The regional unemployment rate was 2.1 percent in September, well below the 2.6 percent level recorded one year earlier. Initial claims for unemployment insurance in September 2018 fell by 10.3 percent from one year earlier and the Southeast Minnesota labor force decreased by 0.8 percent. The job vacancy rate in Southeast Minnesota remains elevated as labor shortages continue to plague this region of the state. The planning area’s annual bankruptcies were 11.8 percent higher than one year ago.

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

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