Northeast Minnesota Economic and Business Conditions Report Second Quarter 2018

A slowing of economic growth in Northeast Minnesota is expected over the next several months according to the predictions of the Northeast Minnesota Index of Leading Economic Indicators (LEI). Three of the five components of the LEI decreased as the overall index fell by 2.65 points in the second quarter. A decline in Duluth metropolitan area residential building permits weighed heavily on the leading index and a fall in a general measure of statewide business conditions also contributed to the negative reading. Lower new filings of incorporation in the Northeast Minnesota planning area had a small unfavorable impact on the LEI. Lower initial jobless claims in the region and an improvement in a purchasing managers’ manufacturing index made a positive contribution to this quarter’s LEI. The Northeast Minnesota LEI is now 3.8 percent lower than it was one year ago. There were 645 new business filings with the Office of the Minnesota Secretary of State in Northeast Minnesota in the second quarter of 2018 — representing a 1.2 percent reduction from one year earlier. Forty-four new regional business incorporations were filed in the second quarter—24.1 percent fewer than in the same period of 2017. New limited liability company (LLC) filings in Northeast Minnesota fell 1.3 percent to a level of 387. New assumed name filings increased 5.1 percent and there were 30 new filings for non-profit—2 more filings than in the second quarter of 2017. Sixty-eight percent of new business filers in the Northeast Minnesota planning area completed the voluntary Minnesota Business Snapshot (MBS) survey in this year’s second quarter. Results of this voluntary survey indicate that 3.9 percent of new filers come from communities of color, while 9.1 percent of new filings come from veterans. 3.9 percent of new filers come from the disability community and only 1.6 percent of new filings are made by the immigrant community. Forty-four percent of new business filings in Northeast Minnesota in this year’s second quarter were initiated by women. MBS results also show that most new business filers in Northeast Minnesota have between 0 and $10,000 in annual gross revenues (although 43 new filers have revenues in excess of $50,000). The most popular industries for new businesses in Northeast Minnesota are construction, retail trade, professional/scientific/technical, real estate/rental/leasing, arts/ entertainment/recreation, 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. Northeast Minnesota employment was 3.6 percent higher than year ago levels in June. The regional unemployment rate was 3.9% (considerably lower than one year ago) and the labor force rose by 2.2% from one year earlier. June 2018 initial claims for unemployment insurance were 16.1 percent lower than the same month last year. Average weekly wages in the region rose 2.7 percent over the past year and annual bankruptcies in Northeast Minnesota continue to rise. With the exception of a year-over-year decline in the value of Duluth area building permits and lower weekly work hours, economic activity in the Duluth/Superior Metropolitan Statistical Area (MSA) was strong. Northeast Minnesota’s largest market experienced a 1.5 percent increase in overall employment over the year ending June 2018, and education/health and manufacturing sector employment also rose. The area unemployment rate fell to 3.9 percent and the labor force rose 0.8 percent. Average hourly earnings increased by 5.6 percent