Rochester economy Ronald A. Wirtz Regional Outreach Director Past - PowerPoint PPT Presentation

The state of the Rochester economy Ronald A. Wirtz Regional Outreach Director Past Editor, fedgazette

Disclaimer The views expressed here are the presenter's and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. minneapolisfed.org

Federal Reserve System • The central bank of the U.S. (est. 1913)  Supervises and regulates banks • Bank/financial holding companies (own/control 1+ banks) • State-chartered member banks • Foreign branches of national- and state-member banks • State-chartered U.S. branches of foreign banks  Offers financial services • Manages (‘clear’) financial payments between parties • Helps banks meet public demand for cash  Sets monetary policy • “Dual mandate”: Stable prices, maximum employment  Setting interest rates via FOMC; quantitative easing • 12 district banks nationwide track regional economies

9 th District Cleveland

Minneapolis Fed’s Ninth District Our job is to understand this regional economy, especially its metropolitan markets

“The state of the Rochester economy” Implied question: Is the Rochester economy performing well, or poorly? Answer: “Yes” • Complex topic: Objective measures; subjective framing • The “answer” depends on subjective choices  performance metrics  their relative performance (peer comparisons)  and the timeframe chosen

You decide the state of the Rochester region based on … • a variety of performance metrics (not all of them economic) • tabulated over various timeframes • compared to similar metro regions

Similar metro regions… • La Crosse, Wis. (pop. 134,000) • St. Cloud, Minn. (pop. 189,000) • Rochester, Minn. (pop. 206,000) • Fargo, ND (pop. 209,000) • Sioux Falls, SD (pop. 228,000)

Unemployment much lower in Midwest Annual unemployment rate 12 10 U.S 8 La Crosse Percent St. Cloud 6 Rochester 4 Sioux Falls 2 Fargo 0 2001 2003 2005 2007 2009 2011 2013 2015 Source: BLS, Local Area Unemployment Statistics

Output growth higher in Rochester ... kind of Index of real GDP index for all industries 2001 = 100 130 125 Rochester 120 U.S. 115 Minnesota 110 105 100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Bureau of Economic Analysis

Rochester output sluggish in the last decade Index of real GDP (2004 GDP = 100) 160 150 140 Fargo 130 Sioux Falls U.S. metros 120 La Crosse Minnesota 110 Rochester St. Cloud 100 90 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Bureau of Economic Analysis

Unbundling Rochester’s economic growth Health care’s share of regional GDP 40% 35% 30% 25% 20% 15% 10% 5% 0% United States Fargo, ND Sioux Falls, SD* St. Cloud, MN La Crosse, WI Rochester, (metro ave.) MN* *Rochester and Sioux Falls are author estimates due to non-disclosure requirements of BEA output data Source: Bureau of Economic Analysis

Rochester's two economies Real GDP (2009 chained dollars) $7 $6 $5 Nonhealth care $4 Billions $3 Health care and educational services $2 $1 $0 Source: Bureau of Economic Analysis

Turning to jobs… Employment index: Rochester speeds ahead of state September employment of each year; Sept. 2005 = 100 115 110 Rochester 105 100 Minnesota 95 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: BLS, Quarterly Census of Employment & Wages

Jobs: Rochester middle of the pack Employment index: September 2005 = 100 Annual September total job figures 125 120 Fargo 115 Sioux Falls Rochester 110 St. Cloud 105 La Crosse 100 95 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: BLS, Quarterly Census of Employment & Wages

Rochester: Big drop in “goods” jobs Goods = Ag & Mining, Construction, Manufacturing Percent change in jobs, Sept. 2005 to Sept 2015 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Goods Services Goods Services Goods Services Goods Services Goods Services Fargo La Crosse Rochester St. Cloud Sioux Falls Source: Bureau of Labor Statistics, Quarterly Census of

Demographic trends… Rochester population growth: Also the middle child Population index: 1990 population = 100) 180 Cass County (Fargo) 160 Minnehaha (Sioux Falls) Olmsted County 140 (Rochester) Stearns County (St. Cloud) 120 La Crosse County (La Crosse) 100 1990 1995 2000 2005 2010 2015 Source: U.S. Census

More recently, a bigger separation MSA population growth index 2010 = 100 112 Fargo MSA 110 Sioux Falls MSA United States 108 Minnesota 106 Rochester MSA 104 St. Cloud MSA La Crosse MSA 102 100 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Olmsted County population growth slowing Compound annual population growth rate 1.75 1.5 Annual percent 1.25 1 0.75 0.5 0.25 0 1990 to 2000 2000 to 2010 2010 to 2015 Source: U.S. Census

Labor force growth slower than most peers 1990 labor force = 100 180% 170% Sioux Falls 160% Fargo 150% 140% St. Cloud 130% Rochester 120% La Crosse 110% 100% 1990 1995 2000 2005 2010 2015 Source: BLS, Local Area Unemployment Statistics

MN labor force participation rate: Lower, but bottomed out? 77 76 75 74 73 Percentage of civilians 16 72 years old and over, either 71 working or looking for work 70 69 68 1992 1996 2000 2004 2008 2012 2016* * Annual measure, except 2016, which is in February Source: Bureau of Labor Statistics

Population & labor force trends and housing: Build it and they will come, or vice versa?

Single-family permits overall still fairly sluggish, especially in Rochester 8,000 Annual single-family building permits 7,000 6,000 La Crosse 5,000 St. Cloud 4,000 Rochester 3,000 Sioux Falls 2,000 Fargo 1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Multi-family construction strong; never really slowed in Fargo, Sioux Falls 4,500 Annual multi-family building permits 4,000 3,500 La Crosse St. Cloud 3,000 Rochester 2,500 Sioux Falls 2,000 Fargo 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Rochester single family; growing multi-family Rochester MSA pop. = 206,000 3,500 Multi-family Single-family 3,000 2,500 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Sioux Falls more consistent, balanced Sioux Falls MSA pop. = 228,000 3,500 Multi-family Single-family 3,000 2,500 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Fargo above pre-recession levels; high levels of multi-family Fargo MSA pop. = 206,000 3,500 Multi-family Single-family 3,000 2,500 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census

Rochester: high rate of home ownership Owner-occupied housing unit rate, 2010-2014 74% Olmsted County (Rochester) 71% Stearns County (St. Cloud) 65% La Crosse County (La Crosse) Minnehaha County (Sioux Falls) 64% 53% Cass County (Fargo) Source: U.S. Census, American Community Survey 2010-2014

Rochester home values, median owner costs are higher $180,000 $1,500 $160,000 $1,300 Median value of owner-occupied housing $140,000 $1,100 Median monthly owner costs $120,000 $900 $100,000 $700 Olmsted Stearns Cass La Crosse Minnehaha County County County County County (Rochester) (St. Cloud) (Fargo) (La Crosse) (Sioux Falls) Source: U.S. Census, American Community Survey

Rochester has higher rent costs than peers Median gross rent, 2010-2014 Olmsted County (Rochester) $808 La Crosse County (La Crosse) $741 Stearns County (St. Cloud) $730 Minnehaha County (Sioux Falls) $698 Cass County (Fargo) $694 Source: U.S. Census, American Community Survey

Rochester median household income the best by a large margin Median income, 2014 Olmsted County (Rochester) $69,430 Minnesota $61,473 Stearns County (St. Cloud) $55,832 Minnehaha County (Sioux Falls) $55,107 Cass Counmty (Fargo) $53,755 United States $53,657 La Crosse County (La Crosse) $49,790 Source: U.S. Census, American Community Survey

Cost-burdened renters: High incomes not translating for Rochester renters Renters paying more than 30 percent of income for housing (2013) 50 St. Cloud 45 44.4 La Crosse 43.3 Fargo 42.4 Rochester 40.9 40 Sioux Falls 36 35 30 25 Source: Harvard Joint Center for Housing Studies

It’s easy to focus the economy. Today. But over time, it’s all about the everything … Quality of place involves many factors – including (but not exclusive to) the health of the economy.

Rochester: Top of education class County-level education attainment 2010-2014 average 100% 90% Bachelor's degree or 80% higher 70% Some college or 60% associate's degree 50% 40% High school diploma only 30% 20% Less than a high 10% school diploma 0% Olmsted Cass La Crosse Minnehaha Stearns (Rochester) (Fargo) (La Crosse) (Sioux Falls) (St. Cloud) Source: U.S. Census, American Community Survey