Southwest Minnesota Economic and Business Conditions Report Fourth Quarter 2017

Despite a negative reading of the fourth quarter St. Cloud State University Southwest Minnesota Index of Leading Economic Indicators (LEI), economic fundamentals in Southwest Minnesota appear to be sufficiently strong to see a continuation of steady regional economic growth over the next several months. Two of four LEI components were positive in the fourth quarter. An increase in residential building permits in the Mankato MSA and higher new business filings of incorporation and LLC in Southwest Minnesota contributed favorably to the LEI. A weaker rural Minnesota economic outlook and higher initial jobless claims in recent months helped drag down this quarter’s leading index. There were 620 new business filings with the Office of the Minnesota Secretary of State in Southwest Minnesota in the fourth quarter of 2017 — representing 2.1 percent more new filings than one year ago. There were 37 new regional business incorporation filings in the fourth quarter, a 33.9 percent decrease from last year’s fourth quarter. New LLC filings in Southwest Minnesota rose 1.8 percent from one year earlier and new assumed names climbed to 157—a 12.1 percent increase compared to December 2016. There were 33 new filings for Southwest Minnesota non-profit in the fourth quarter—eight more filings than one year ago. Fifty-six percent of new business filers in the Southwest Minnesota planning area completed the voluntary Minnesota Business Snapshot (MBS) survey in this year’s fourth quarter. Results of this voluntary survey indicate that 3.8 percent of new filers come from communities of color. Approximately 8.1 percent of new business filings are from veterans. About 1.2 percent of new filers come from the disability community and 1.4 percent of new filings are made by the immigrant community. Forty-two percent of new business filings in Southwest Minnesota in this year’s fourth quarter were initiated by women. MBS results also show that most new business filers in Southwest Minnesota have between 0 and $10,000 in annual gross revenues (although 33 new filers have revenues in excess of $50,000). The most popular industries for new businesses in Southwest Minnesota are retail trade, construction, and other services. Employment levels at most new firms are between 0 and 5 workers, and more than half of those starting a new business consider this a part-time activity. Employment of Southwest Minnesota residents increased by 1.1 percent over the year ending December 2017. The regional unemployment rate was 3.5 percent in December, a decrease from a 4.2 percent reading in December 2016. Initial claims for unemployment insurance were 4.7 percent lower than year-ago levels in December. Due to a statistical anomaly, the region’s average weekly wages fell in the third quarter of 2017 compared to one year earlier. The Southwest Minnesota labor force rose 0.4 percent over the year ending December 2017 and bankruptcies continued to fall in the region. Economic performance in the Mankato/North Mankato Metropolitan Statistical Area (MSA)—the largest market in Southwest Minnesota—was generally favorable in the most recent quarter. Employment rose, the unemployment rate was lower, average hourly earnings rose, the size of the labor force expanded, the value of residential building permits increased, new business filings were higher, and the relative cost of living fell. The only negative factors were a decline in average weekly work hours and a small increase in initial jobless claims in the Mankato/North Mankato MSA