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, r Minnesota Economy Follows National Economy During Soft Landing The Federal Reserve's successive interest rate hikes during 1994 and softening consumer demand contributed to the slowing of the national economy by the second quarter of 1995. The Minnesota economy followed the nation during this soft landing, with personal income growth • (0.8 percent) reduced to one-half the rates of previous quarters. New jobs were being created, but at a slower rate that restrained both inflation and unemployment rates. The Department of Economic Security (DES) reported Minnesota's unemployment level at 3.8 percent in June 1995, up from March's 3.3 percent, but lower than the 4.0 percent rate one year ago. New business fonnation in Minnesota declined by I 1 percent from the first quarter of 1995, while Statewide business closings increased by 34 percent. The number of start-up jobs declined to the levels of Analyrsis the previous year, as new businesses in service, finance, insurance and real estate industries created almost 50 percent fewer jobs. New business formation and job creation in manufacturing 2nd Quarter, 1995 and associated wholesale trade businesses were also down sharply from the previous quarter. Business dissolutions increased among major Minnesota industry groups, with most job losses occurring in business services, health services and professional services. Compared to the robust first quarter 1995, business closings and job losses about doubled among manufacturing and related wholesale trade businesses. This increase in business closings is not unexpected. Business start-ups in Minnesota surged during the recent strong economic expansion the state experienced. However, many of these start-up businesses failed during subsequent quarters, resulting in an increased number of business closings. April 1994 Sept.1995 2390 — 2360 2370 Wage and 2360 Sala ry 2350 --- Employment,2340 Seasonally 2330 Adjusted (1,000) 2320 — 2310 -- -- • 2300 --- — ---- zz90 ' a°= 2.6 – 2'7 -- 3w' Business 2.J 2.3 2.4 Birth 2t 22 and 8__ 9 - 2 Dissolution - - - — Rates 1.6 Birth Rate E] Dissolution Rate i 2nd Quarter,1994 3rd Quarter,1994 4th Quarter,1994 1st Quarter,1995 2nd Quarter,1995 Large Businesses Continued Major Expansions, Eased on Downsizing Several large manufacturing companies in the state expanded during this quarter, adding new jobs in printing and publishing, wood products, industrial machinery and computers, fabricated metal products and plastic products. Large businesses in the services, retail trade, construction and wholesale trade industries were also major sources of expansion jobs. Overall, nearly 9 percent more businesses had major expansions compared to the previous quarter, which produced 7 percent more expansion jobs. Conversely, major business contractions eased during this quarter, particularly in manufacturing. The retail trade and service industries also reduced their work force, with more than 60 percent of job losses occurring among small businesses in these industries. Small, independent companies with fewer than 50 employees continued to dominate new business formation and new job creation in the state. Over 92 percent of new enterprises and • 78 percent of start-up jobs were created by new small businesses. Large companies created the remaining start-up jobs by opening new branch locations including new retail stores, banking, insurance and real estate and communication service offices. 1