q
businesses await midyear expansion
st. cloud area
uarterly
business report
ROI CHECKLIST
Sherry
2nd Edit
3rd Edit VOL. 10, ISSUE 1 • APRIL 2008
executive summary key results of survey collaborating
February 2007 November 2007 February 2008 publishers
St. Cloud-area firms experienced weak conditions in Diffusion index (% increase-% decrease)
the past three months as key sectors continued to adjust 60
50
to challenging market conditions. Along with ordinary 40
30 Center for Economic Education
seasonal weakness in the winter quarter, area firms also 20 Department of Economics
saw conditions of a more cyclical nature. This weakness 10
0
Social Science Research Institute
was widely expected and, to date, there is no formal evi- Future business Future capital Future employee ...
activity expenditures compensation
dence that the local economy has slipped into recession
— though economic weakness abounds. 13 percent of 87 firms who returned this quarter’s
Substantial local employment growth revisions sug- business outlook survey reporting increased hiring in
gest the area economy was much stronger through the past three months — and 18 percent trimming
St. Cloud Area Economic
Development Partnership
much of 2007 than many generally believed. Area employment. The capital expenditures survey index President: Tom Moore
employment growth for the 12 months ending in was virtually flat over the past three months and the
320-656-3815
January 2008 was 1.7 percent — well above employ- national business activity survey item was very weak. about the
ment growth in the Twin Cities, and almost equal to Employee compensation numbers remained low. authors
St. Cloud’s longer-term trend job growth rate. While The future outlook is much brighter, as 60 percent
conflicting signals have been a challenge in forecasting of surveyed firms expect an increase in activity in six
local economic conditions, evidence seems to show a months and only 7 percent expect conditions to wors-
period of very weak growth through spring, followed en. Employment and hours worked are expected to pick
by an expansion in growth in the final half of 2008. The up, though this is, in part, a seasonal pattern. National
St. Cloud probability of recession index fell to a reading business conditions are expected to modestly improve. King Banaian
of 32.8 percent in February, indicating subsiding reces- After several periods of relative weakness in capital ex- Chairman
sionary pressures. The St. Cloud Area Index of Leading penditures, this area is expected to rise substantially. Economics Department,
Economic Indicators continued to drift sideways. St. Cloud State University
However, 59 percent of firms report no expected plan 320-308-4797
Twenty-nine percent of surveyed firms reported an to increase worker pay over the next six months.
increase in economic activity in the past three months, Forty-six percent of area firms expect a slowdown
while 31 percent reported a decrease. Current em- in local commercial construction in the next year,
ployment conditions are also very weak, with only while 11 percent expect that local sector to expand.
Almost one-half of surveyed firms report the effects of
index of leading increased ethanol demand have had “no discernible
economic indicators Rich MacDonalD
Six-month moving average effect” on their business (although almost one out of
Assistant professor,
104 every 10 firms says it has had a large unfavorable ef- St. Cloud State University
102
100
fect). Forty-four percent of firms believe we are in or Economics Department
320-308-4781
98 are soon headed for local recession, while 33 percent
96
94
expect below normal local growth (but no recession)
’02 2003 2004 2005 2006 2007 ’08 and 20 percent expect normal growth.
april-june 2008 | roi | 33
current activity The employment diffusion index was also current
Tables 1 and 2 report the most recent lower than normal in February (although it capital expenditures
Diffusion index, percent
results of the business outlook survey. Re- is usually at its seasonal low in this quarter). 50
40
sponses are from 87 area businesses that However, it is markedly improved from the 30
20
returned the mailing in time for the report. -19.4 recording registered one year ago. 10
Firms represent a diverse collection of busi- Similar comments can be made for the 0
-10
nesses, including retail, manufacturing, survey question on length of workweek. ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08
construction, financial, health services and Area firms still report some difficulty hir- dex is the lowest recorded since the fall 2001
ROI CHECKLIST
government enterprises of sizes ranging ing qualified workers, but they seem to be survey — although this outlook is expected
from small to large. Responses are confi- hanging on to those they have. Prospective to improve (see Table 2) in six months’ time.
Sherry
dential. Written and verbal comments have labor force entrants may be finding it dif- The current prices received index is positive,
not been attributed to individual firms. ficult to obtain the requisite skills and ex- 2nd Edit
but we don’t observe much local pricing pres-
Survey responses suggest that, in the past perience employers find so valuable. sure. Many commentators have suggested a
3rd Edit
three months, the St. Cloud area experi-
ROI CHECKLIST Firms’ capital expenditures were very stagflationary scenario could play out in the
enced economic conditions that are weaker weak over the past three months. With a U.S. economy. While there are genuine risks
Sherry
than normal for this time of year. The cur- value of 3.4, the index on this item is the this could happen, so far it seems inflation-
rent activity diffusion index (representing
2nd Edit lowest since the winter 2002 survey, when ary expectations are sufficiently in check to
the percentage of respondents indicating the area economy was mired in recession. manage the risk for now.
3rd Edit
an increase minus the percentage indicat- Concerns about capital spending are worth
current national
ing a decrease in any given quarter) is -2.3 noting, because this is such a key indicator business activity
in this quarter’s survey, which is about the of firms’ outlook. Fortunately, while cur- Diffusion index, percent
40
same as was reported one year ago (-1.1), rent capital expenditures were very weak, 30
20
but is well below the February 2005 read- future outlook on this survey item (see
theROI CHECKLIST 10
0
ing of 19.3. Table 2) is much more favorable. With a -10
Sherry
value of 35.6, the future capital expendi-
-20
-30
’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08
current business activity tures index is the highest recorded in two
2nd Edit
70
60
Diffusion index, percent
years. Expectations of a rebounding econ- outlook
50
40 3rd Edit
omy, accompanied by more favorable fed- Recent quarters’ future outlook has
30
20
10
eral tax policy and lower interest rates, may been seasonally tepid. We have consis-
0
-10 stimulate capital purchases by midyear. tently observed a future outlook below
-20
’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 The current national business activity in- what’s expected during normal times.
table 1-current February 2008 vs. Three months ago November 2007
business conditions Decrease (%) No Change (%) Increase (%) Diffusion Index3 Diffusion Index3
What is your evaluation of:
Level of business activity 31.0 40.2 28.7 -2.3 8.3
for your company
Number of employees 18.4 67.8 13.8 -4.6 -8.3
on your company’s payroll
Length of the workweek 23.0 64.4 12.6 -10.4 -13.1
for your employees
Capital expenditures (equipment,
machinery, structures, etc.) 16.1 63.2 19.5 3.4 15.5
by your company
Employee compensation (wages
4.6 56.3 39.1 34.5 25.0
and benefits) by your company
Prices received for
your company’s products 17.2 55.2 27.6 10.4 -3.6
National business activity 28.7 51.7 10.3 -18.4 -11.9
Your company’s difficulty
attracting qualified workers 5.7 78.2 14.9 9.2 14.2
Notes: (1) Reported numbers are percentages of businesses surveyed. (2) Rows may not sum to 100 because of “not applicable” and omitted responses. (3) Diffusion indexes represent
the percentage of respondents indicating an increase minus the percentage indicating a decrease. A positive diffusion index is generally consistent with economic expansion.
Source: SCSU Center for Economic Education, Social Science Research Institute and Department of Economics
34 | roi | april-june 2008
ROI CHECKLIST
For the first time in several quarters, the tion index has slowly declined. On one
Sherry
survey seems to suggest a brighter future
whAt IS AffEctIng hand, this may not be good news for the
outlook. 2nd Edit of 52.9, the diffu-
With a value yOUR cOmPAny? work force. On the other hand, this may
ROI CHECKLIST
sion index on future business activity is Comments to this question include: be part of a natural evolutionary market
3rd Edit
the highest observed in two years. To be dynamic Sherry from economic weak-
resulting
• “One area of concern is increasing prop-
sure, this recording is below its high of 75 erty tax rates, especially commercial prop- ness. Many economic models incorporate
2nd Edit
in winter 2004, but it is also well above erty tax. I am involved in several commercial reductions in real wages as the natural ad-
the 30.6 reading in winter 2002 (when real estate projects and I am seeing that justment3rd Edit to challenging mar-
firms make
the outlook was bleak). the excessive burden of real estate taxes is ket conditions, so this series may be saying
starting to be a deterrent to investment.” something about that. These adjustments
future business activity • “Foreclosure market is a direct competi- are ultimately necessary to put an economy
Diffusion index, percent tion for new construction as many fore- back on a path of sustainable growth.
80
70 closed homes are five or less years old.”
60
50 • “Increase in gas tax will negatively affect
40
30 future employee
20 our business. Local taxes have skyrocketed. compensation
10
0 Our Legislature has misspent our gas tax on Diffusion index, percent
’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 80
social programs, etc., over the years.” 70
• “We are in a normal seasonal slowdown. 60
Unfortunately, this improved outlook is We are fortunate to be diversified (in type of 50
only expected to marginally impact work- work we do and multiple locations served).”
40
30
ers. While an index of 23 on expected fu- • “Federal Reserve cuts and further cuts will ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08
ture employment is a welcome relief from materially affect older depositors who live off
ROI CHECKLIST
the 2.3 value recorded last quarter (and the dividends — reducing their spending habits.” As noted, while some seem to be con-
negative number recorded before that), it Sherry demand for (building materi-
• “Reduced cerned about stagflationary pressures, there
is well below normal winter survey expec- als) has caused increased pressure on prices is no real evidence of this in the prices re-
2nd Edit
tations. For example, the winter 2004 sur- from competitors in that market segment.” ceived column of Table 2.
vey number was 42.9. Expected increases 3rd Edit needs to balance reporting
• “The media While inflationary pressures seem to
in average hours worked (as well as higher to include some good signs to the economy be a consideration in, for example, world
future capital expenditures) will play a large or we can talk ourselves into a recession.” commodity markets, the reverse is found
role in firms’ future expansion efforts. • “Our business is strongly influenced by in housing markets, where housing price
At a value of 34.5, the average value of the new housing market. With it being slow declines continue to emerge across the
the expected future employee compensa- — we are slow. ...” United States.
table 2-future Six months from now vs. February 2008
November 2007
business conditions Decrease (%) No Change (%) Increase (%) Diffusion Index3 Diffusion Index3
What is your evaluation of:
Level of business activity 6.9 31.0 59.8 52.9 26.1
for your company
Number of employees 9.2 56.3 32.2 23.0 2.3
on your company’s payroll
Length of the workweek 3.4 71.3 23.0 19.6 4.8
for your employees
Capital expenditures (equipment,
machinery, structures, etc.) 6.9 47.1 42.5 35.6 19.0
by your company
Employee compensation (wages 2.3 58.6 36.8 34.5 48.8
and benefits) by your company
Prices received for
your company's products 10.3 57.5 29.9 19.6 27.4
National business activity 13.8 56.3 19.5 5.7 0
Your company’s difficulty
attracting qualified workers 6.9 69.0 20.7 13.8 13.1
Notes: (1) Reported numbers are percentages of businesses surveyed. (2) Rows may not sum to 100 because of “not applicable” and omitted responses. (3) Diffusion indexes represent
the percentage of respondents indicating an increase minus the percentage indicating a decrease. A positive diffusion index is generally consistent with economic expansion.
Source: SCSU Center for Economic Education, Social Science Research Institute and Department of Economics
april-june 2008 | roi | 35
special questions of construction supplies, we have orders • “High commodity prices have increased
Anyone driving around the St. Cloud booked for spring of 2008.” income. Capital investment by farmers has
area in the past several months has noticed • “We are seeing a decrease in new loan increased business for us. Less account de-
several high-visibility commercial construc- requests for commercial construction and linquency and increased farm income.”
tion projects. Examples include the ING expect that will continue.” • “We are in (an industry that uses grains
downtown expansion, St. Cloud’s new pub-
Special Question 1 as an input) and we’ve seen more farmers
lic library, a new parking ramp and Science QUESTion 2 growing corn versus (grains). The price for
Building expansion at SCSU, and the Sauk Ethanol markets have received atten- (grains) has increased by 50% and that has
Rapids bridge and associated commercial tion in recent months as ethanol gasoline also raised (our final product) prices.”
Special question 2
development. With many of these projects requirements, among other things, have • “I think the ethanol program will go
soon approaching their ends, we thought it led to increased demand for corn. This has in the history books as one of the largest
ROI CHECKLIST boondoggles to ever hit the state of MN
appropriate to ask businesses to comment not only pushed up gas prices, it has also
on what is in the pipeline. Specifically, we led to secondary effects in which grain sup- and the country.”
Sherry • “Wheat prices are three times what we
asked the following question: plies have declined (leading to higher grain
2nd Edit prices) as farmers allocated a greater share paid a year ago. We expect our (processed
QUESTion 1 of their acreage to ROI CHECKLIST This has
planting corn. inputs) to go up also as soybeans are af-
3rd Edit fected.”
The St. Cloud economy has recently caused higher food and beverage prices,
benefited from a number of high-visibility Sherry • “Farmers are spending more money due
commercial construction projects, some
among other impacts. We asked area firms
the following question: Edit
2nd to increased revenue from this demand.”
of which are nearing completion. Relative
to the past 12
• “Increased production of ethanol from
months, which 1.1% 6.9%
3rd Edit
Many observers have noted that increased corn is the primary reason corn and soy-
of the following 1.1% 18.4% demand for ethanol has caused an increase bean prices have doubled. Wheat prices are
does your busi- 4.6% in feed (and other) prices. To what extent up 300 percent due to crop shortfalls. Grain
ness expect for 28.7%
5.7%
has your business (either directly or indi- markets will remain high to attract acres.
area commer- rectly) been
cial construc- influenced by
Food prices will increase substantially in
23% 10.3% 1.1% 9.2%
tion projects the increase 17.2% 2008. Expect rising inflation. Our energy
2.3%
in the next 12 in ethanol 13.8% policy is basically a tax on food. This im-
months? A large slowdown demand? 6.9% pacts food prices in the U.S. and globally,
Almost half A moderate slowdown While al- 49.4% leading to more starvation and hunger.”
of firms expect- A small slowdown most one-half • “Farmers are profitable and able to in-
ed a slowdown About the same pace of firms report vest in capital equipment.”
as the past 12 months
in commercial the increase Large unfavorable e≠ect • “Hydrogen is the fuel of the future for
A small expansion
construction in ethanol de- Small unfavorable e≠ect the U.S. 2009 red and white meat costs will
A moderate expansion
relative to the mand has had No discernible e≠ect be at all-time highs. 2008 will be the largest
A large expansion
past 12 months. Other
no discern- Small favorable e≠ect weather market in the history of U.S. farm-
Many observers N/A ible impact Large favorable e≠ect ing and agriculture.”
have noted how on their firm, Other
important com- *Numbers may not add up
to 100 due to rounding.
the results are N/A QUESTion 3
mercial con- more interest- *Numbers may not add up This quarter’s final question is on a topic
struction contracts have been for area home- ing than that. to 100 due to rounding. of high interest to the authors of the St.
builders who have shifted into commercial Twenty-three Cloud Area Quarterly Business Report.
projects. To date, much of this high visibility percent indicate an unfavorable impact We have spent much of our professional
construction has helped support this key lo- and 9 percent report a favorable impact. lives teaching students about the charac-
cal sector, so it will be worth watching to see The written responses are most illuminat- teristics of the business cycle and their key
what happens if commercial construction ing about the relative distribution of costs components, particularly expansions and
weakens at the same time the area housing and benefits of the ethanol requirements. recessions. There has been a media clamor
market is weak. Farmers (and those who sell to farmers) — some might say an obsession — with
Written responses include: seem to be better off, while any firm that the desire to call the current situation a
• “(A moderate slowdown) due to reces- uses corn or grain as a productive input are recession, even though economists gener-
sion talks.” worse off. ally agree that it takes months to determine
• “Our clients are delaying expansion Written responses include: when one has started. Recessions are big
projects.” • “Our cost for grain and protein prod- events and are not to be taken lightly —
• “Low interest rates should entice some ucts has gone up over 75% in the last year. most economists agree that business senti-
companies to build.” Capital required for inventory has dramati- ment drives investment decisions — so it is
• “(A moderate expansion.) As a supplier cally increased.” wise not to get too far ahead of the data in
36 | roi | april-june 2008
making premature pronouncements.
It may well be that the local economy has slipped (or will thAt'S SOmE REVISIOn!
soon slip) into recession, although we cannot say for sure
at this time. We decided to take a different approach and
ROI CHECKLIST We live in a TiMe WheRe Change happenS faSTeR and faSTeR. That
ask area firms if they thought we were in recession, head- can create issues for government workers who try to figure out how many
Sherry
ing for recession or could expect differing degrees of local people are employed. Firms come and go faster, entrepreneurship activities
economic growth in the year ahead.2ndasked:
We Edit increase, and thus more jobs are created in places we do not know about.
The data we report as employment comes from a survey of a sample of
3rd Edit
There has been a lot of recent discussion about the possibil- businesses. Government cannot survey them all. Annually, it looks back at
ity of a national, state and local data from all employers it can track, primarily using unemployment insur-
recession. Which of the following
best describes your company’s 1.1% ance information, to revise the estimates they reported the previous two
3.4%
expectation about the prospects years. The revisions typically change the monthly estimates by 0.5 percent
of a local recession in 2008? to 0.9 percent, according to the Bureau of Labor Statistics.
We will let the chart (and the 19.5% The revisions reported in March on the level of St. Cloud employment
accompanying comments) do 33.3% were larger than this, as the graph below shows. On average, the number
most of the talking, but suf- of area jobs reported monthly was raised by more than 500 workers in the
32.6%
fice it to say economists are not 10.3% first half of 2007 and by 1,252 in the second half. The impact of this change
the only ones who are uncertain cannot be understated. Our previous Quarterly Business Report had re-
about whether we are in, heading We expect local economic ported job growth of 0.8 percent for the year through October based on the
for or will avoid a recession. One growth that is more rapid previous data. This was consistent with a story of a slowing economy and
ROI CHECKLIST
interesting note is 44 percent of than normal
job growth from levels experienced in the first half of the year.
surveyed firms report they believe We expect normal Sherry
local economic growth The data now revised show growth job growth of 2 percent, which would
we are either in recession — or
We expect below-normal 2nd Edit
mean real output in the area grew perhaps 0.8 percent to 0.9 percent faster
will be in the coming months. economic growth, but do than we previously thought. This is possibly the difference between reces-
This is remarkably close to the not expect a local recession 3rd Edit
sion and continued normal growth in the local economy. Area employment
45 percent of economists recently We expect a local recession
to begin in the first half
growth from December 2006 to December 2007 was 2 percent rather
surveyed by the National Associa-
of 2008 than 0.5 percent reported in late January. (January over-the-year growth in
tion of Business Economists who
We believe we already are employment locally eased to 1.7 percent.) The revised figure is consistent
indicated recession is likely this in a local recession with normal employment
year. N/A growth in the area. st. cloud
Written responses include: *Numbers may not add up employment and revision
• “We will see an increase in to 100 due to rounding. This same pattern oc-
Reported January 2008 Revised March 2008
business revenue due to a reces- curred last year and was
107,000
sion. We will experience a slow- reported in last April’s 105,000
down in the number of new cli- QBR. Indeed, the revi- 103,000
101,000
ents due to the reduced number of new startup businesses sions in second-half 2006 99,000
and the delay in expansion by our existing client base.” employment averaged 97,000
J F M A M J J A S O N D J
• “We continue to see weakness in housing both in com- 1,942 workers, larger than 2007 ’08
mercial developers and residential demand. This is leaking this year. As we noted then,
over to commercial retail.” the usual explanation for this is the churn of firms may be larger. The old
• “Slowdown — but small scale.” firms drop out of the sample when the firm surveyed reports it is no longer
• “I feel the spring will be slow, but if interest rates and in business, but the workers may go to a new concern that is not in the set
high gas prices continue to drop, it could stimulate the of surveyed firms. Government data collectors can only learn about those
economy for a good fall and start of 2009.” new firms from the tax filings.
• “There has been and will be a decrease in growth, but I What sectors accounted for the differences? One probable source of new
would not call it a recession.” firms is the construction sector. Unlike past statements we may have made
• “Unless we’re buying into the rumors, it seems that dis- about this sector, revised data show average employment at 17,393 in 2007,
posable income isn’t as plentiful and people are watching up from 17,232 in 2006. Almost a thousand jobs were added in the health
their spending.” and education super-sector, more than double previous estimates.
• “While we don’t expect a ‘technical’ recession, we do This should be a reminder to users of local area data that the data are
expect a slowing local economy during the next six months subject to substantial revisions that could cause us to change our views of
and slow growing economy thereafter.” what is going on locally. We can no longer say the area economy was slow-
• “We expect recession will continue to show signs for all ing in the second half of 2007 as the previous data was suggesting. This will
of 2008. High gas prices and poor performing stock market lead us as well to revise downward our projections of a recession slightly.
has placed a lot of people in a conservative behavior.”
april-june 2008 | roi | 37
recession or not? minnesota nesota was in recession from August 2007.
Since state economist Tom Stinson stat- coincident indicators Data revisions may change this result.
July 1992=100
ed Jan. 15 that Minnesota is in a recession, 170 Some anecdotal data received since then in-
165
that word has dominated conversations 160 dicate sales tax revenues in the state slowed
155
about the local economy. At that time, his 150
sharply in December, and the unemploy-
data on jobs over the year was a decline of 145 ment rate fell 0.2 percent in January. Each
140
353. The revisions discussed in the special ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 indicator pushes in opposite directions. The
box revised that number to a gain of 6,217. mix of data generally makes the forecasting
Growth in Minnesota jobs was 0.6 percent, serve have provided a model that instead environment even more treacherous than
almost on a par with the 0.7 percent expe- provides a probability of recession. It has usual for a potential turning point.
rienced by the United States as a whole. an advantage that ours lacks insofar as it Locally, Table 3 shows that growth in em-
Still, the question was whether the decline ROI CHECKLIST
makes much stronger statements of wheth- ployment locally was relatively broad-based.
in jobs was sufficient to trigger a call of re- er a state or local economy is in recession. Local manufacturing employment was up
cession for the state or local economy. There Sherry
But as can be seen in the graph below, it 1.5 percent in the 12 months to January,
are data available for the state economy that can give a falseEdit
2nd positive reading of reces- and growth in services kept about the same
some economists have used. One project at sion. The authors advise caution in using pace. The retail and leisure-hospitality sec-
the Federal Reserve Bank of Philadelphia is 3rd Edit
it in isolation; the model’s predictions have tors put some drag on area employment, as
an index derived from a set of data on in- to be placed in context with other infor- higher oil prices and narrowing access to easy
come, employment and unemployment mation the forecaster has about the state of
ROI CHECKLIST credit to home credit lines harmed retailers
data, and hours worked in manufacturing. the economy. But the signal from this data nationwide, particularly for higher-end re-
The data since 2000 is plotted in the chart at — given Sherryrevisions in employment
before tailers. The decline in retail was more severe
top right and shows that since late summer, reported in early March — suggests Min- in St. Cloud than elsewhere in the state. We
2nd Edit
the trend has been down for the Minnesota also note that with the latest data revisions,
probability of
3rd Edit the annual share of employment in manu-
economy, which could indicate the state has recession in minnesota
begun a period of recession. 120% facturing has moved below 17 percent for
100%
Consistent with the method we have 80% the first time since data collection began in
60%
used in the last few issues of QBR — and 40% 1990. St. Cloud is not immune to the secu-
in fact part of our inspiration for the model 20%
0%
lar decline in manufacturing employment
— economists at the St. Louis Federal Re- ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 occurring nationally, as productivity gains
table 3 - St. Cloud (Stearns and Benton) 13-county Twin Cities area Minnesota
employment 15-year trend Jan. ’07-Jan. ’08 Jan. ’08 15-year trend Jan. ’07-Jan.’08 Jan. ’08 15-year trend Jan. ’07-Jan. ’08 Jan. ’08
employment growth rate employment employment
trends growth rate growth rate
share
growth rate
share
growth rate growth rate
share
Total nonagricultural 2.0% 1.7% 100.0% 1.5% 0.4% 100.0% 1.5% 0.6% 100.0%
Total private 2.2% 1.3% 85.1% 1.6% 0.4% 86.4% 1.6% 0.4% 84.6%
Goods producing 2.0% 0.8% 21.0% 0.3% -2.8% 14.9% 0.5% -2.2% 16.2%
resources
Construction/natural resource 3.9% -2.1% 4.2% 3.2% -6.8% 3.7% 2.9% -5.3% 3.9%
Manufacturing 1.6% 1.5% 16.8% -0.4% -1.4% 11.2% -0.1% -1.1% 12.3%
Service providing 2.0% 1.9% 79.0% 1.8% 1.0% 85.1% 1.7% 1.1% 83.8%
Trade/transportation/utilities 0.4% 0.4% 21.0% 1.1% 0.2% 19.1% 1.1% 1.0% 19.4%
Wholesale trade 1.8% 0.2% 4.3% 1.5% 0.2% 4.9% 1.5% 0.9% 4.8%
Retail trade -0.4% -0.9% 13.1% 1.2% -0.1% 10.5% 1.0% 0.8% 11.1%
Trans./warehouse/utilities 2.4% 5.5% 3.5% 0.3% 1.6% 3.7% 0.6% 1.5% 3.5%
Information 1.5% -3.4% 1.2% 0.8% 0.7% 2.4% 0.5% 0.1% 2.1%
Financial activities 4.1% 0.9% 4.5% 1.6% 0.0% 8.0% 1.8% -0.3% 6.5%
Professional & business service 5.7% 3.8% 8.3% 2.1% 0.4% 14.7% 2.4% 0.3% 11.8%
Education & health 3.2% 4.9% 16.4% 3.4% 3.8% 14.3% 3.3% 3.3% 15.8%
Leisure & hospitality 2.8% -1.8% 8.8% 2.1% 1.9% 8.9% 1.9% 1.4% 8.6%
Other services (excluding govt.) 1.3% -0.9% 3.7% 1.6% -0.3% 4.2% 1.1% -2.1% 4.1%
Government 1.0% 3.9% 14.9% 1.1% 0.2% 13.6% 0.8% 1.3% 15.4%
Federal government 0.5% 3.0% 1.7% 0.1% 0.8% 1.2% -0.1% 0.2% 1.2%
State government 0.8% 4.4% 4.3% 1.4% -1.0% 4.0% 0.8% 0.7% 3.5%
Local government 1.2% 3.8% 8.9% 1.2% 0.7% 8.4% 0.9% 1.6% 10.6%
Note: Long-term trend growth rate is the compounded average employment growth rate in the specified period.
Source: Minnesota Department of Employment and Economic Development and author calculations.
38 | roi | april-june 2008
table 4-other 2007 2008
Percent forecasts for growth for the second half of
economic indicators change 2008 on the expectation that the stimulus
St. Cloud MSA labor force 106,407 107,456 1.0% package passed in February will increase
January (Minnesota Workforce Center)
consumer spending by mid- to late-sum-
St. Cloud MSA civilian employment # 100,066 101,282 1.2%
January (Minnesota Workforce Center) mer, and perhaps the cuts in interest rates
St. Cloud MSA unemployment rate* 6.0% 5.7% N/A
made by the Federal Reserve would gain
January (Minnesota Workforce Center) more traction at that time. GDP growth in
Minnesota unemployment rate* 5.4% 5.4% N/A the first half of 2008 will either be negative
January (Minnesota Workforce Center)
Minneapolis-St. Paul unemployment rate* (if there is a recession) or anemic (if not).
4.7% 4.7% N/A
January (Minnesota Workforce Center) Forecasts of home prices for 2008 nation-
St. Cloud-area new unemployment insurance claims
1,623.3 1,566.7 -3.5%
ally show a 4.5 percent decline according
Nov.-Jan. average (Minnesota Workforce Center)
to the February forecast of The Wall Street
St. Cloud Times help-wanted ad linage ROI
5,057 CHECKLIST
4,733 -6.4% Journal’s Economic Forecasting Survey. Fed-
Nov.-Jan. average, in inches
eral Reserve policy is expected to be expan-
St. Cloud MSA residential building permit valuation Sherry3,096.0
6,689.3 -53.7% sionary through the first half of the year, with
In thousands, Nov.-Jan. average (U.S. Department of Commerce)
St. Cloud index of leading economic indicators 2nd
102.3 Edit
102.8 0.5%
0.4%
Fed funds rates in the area of 2 percent to
January (St. Cloud State University)**
2.5 percent expected by most forecasters by
MSA = St. Cloud Metropolitan Statistical Area, composed of Stearns and Benton3rd Edit
counties. June. While many writers appear concerned
# - The employment numbers here are based on household estimates, not the employer payroll estimate in Table 3.
* - Not seasonally adjusted about the Fed’s perceived lack of concern for
**- January-March 2001=100 inflation, forecasters still put their forecasts
NA - Not applicable
ROI CHECKLIST
of CPI inflation by December 2008 at 2.3
percent — slightly higher than the Federal
allow firms to expand production and firms table 5-elements of
Sherry Reserve’s perceived target of 2%, but un-
report skilled labor shortages. st. cloud index of lei likely to constrain its actions if the situation
Other local data found in Table 4 pro- 2nd Edit
Changes from October 2007 Contribution should warrant further cuts in interest rates.
vide mixed signals. Unemployment is tra- to January 2008 to LEI
3rd Edit Question marks for 2009, which fore-
Help-wanted advertising
ditionally high in St. Cloud in January, so in St. Cloud Times
2.27% casters are projecting for the first time, vary
the current reading of 5.7 percent is high Hours worked -0.50% dramatically. The National Association of
compared with last summer but below the New business incorporations -0.05% Business Economists survey finds a median
6 percent reading of January 2007. Un- New claims for unemployment
-0.63% forecast of 2.9 percent GDP growth. Those
employment insurance claims have fallen insurance
Total 1.09% who have had lower expectations for reces-
slightly, suggesting improvement in the sion in 2008 had higher expectations of re-
local labor market. However, lines of help- cession in 2009 in the WSJ survey. Uncer-
wanted advertising has fallen 6.5 percent probability of a recession
Three-month moving average
Smoothed three months tainty of professional forecasters and of our
100%
over the year, and building permits fell by 80% Recession business survey participants in the special
more than half. Regional economists point 60% question about recession are about equal.
40%
out that the decline in permits and building 20%
This does not mean there necessarily will
starts has affected not only construction but 0% be a recession in either year. A problem is in
’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07
also the sale of wood products, appliances the defining of local recessions — there is
and other items that go into new homes. recession forecast index, which had a read- no independent arbiter. Even for state reces-
Help-wanted advertising has moved ing of 32.8 percent probability of recession sions, nobody agrees on one body to make
higher in the past few months (on a sea- for February 2008. This forecast is a state- an “official” declaration (even national re-
sonally adjusted basis), and this is the only ment of the probability of a recession four cession dating is done by a private group.)
item in the St. Cloud Area Index of Lead- to six months ahead, so compared to our Suppose employment growth, after final
ing Economic Indicators that increased. Its forecasts of last fall for actions this spring, revisions of data, did register a growth rate
strength more than counteracted the slight the latest reading indicates a weakening of 0.1 percent or 0.2 percent, and unem-
declines in the other three indicators, as seen risk of recession for summer 2008. ployment rose above 6 percent. Would ob-
in Table 5. Unemployment claims rose late National forecasts generally put the risk servers want to say that was not a recession
in the last year, and hours worked did not of recession somewhere between 40 percent because the number somehow stayed posi-
increase as much as normal for this season. and 50 percent for this spring. That number tive? Economists argue that one can have a
Incorporations of new firms were virtually moved up slowly but steadily throughout recession without a slump in employment.
flat. Those items are also assembled in our fall. Forecasters generally moved up their That may be what happens this time.
in ThE nExT QBR Participating businesses can look for the next survey in May and the St. Cloud Area Quarterly Business Report in the July-September edition
of ROI. Area businesses that wish to participate in the survey can call the St. Cloud State University Center for Economic Education at (320) 308-2157.
april-june 2008 | roi | 39