Quarterlyeconomicindicatorsreportq42013 final

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS

Fourth Quarter 2013 PUBLISHED BY NORTHERN STATE UNIVERSITY SCHOOL OF BUSINESS

INDICATORS Employment (SA)

vs. prior qtr.

vs. prior year

New Entity Filings

vs. prior qtr.

vs. prior year

Personal Income

vs. prior qtr.

vs. prior year

Unemployment

vs. prior qtr.

A Stellar End to 2013 Business Filings advance in Q4 2013, but fall for the year. Although not always predictive of future economic results, business filings can be indicative of the future direction of growth. 2013 ended down versus 2012. The reduction in filings could be the beginning of a moderate downturn for the state as a result of sagging grain prices.

South Dakota/National Unemployment Rates continue to improve. For the three months ending on December 31st, South Dakota’s unemployment rate averaged 3.7%, beating the four year best mark set just last quarter. The continuous improvement in employment is strongly correlated to a healthy and growing economy. While the national unemployment rate continues to lag behind South Dakota at 7.0%, the national number improved by over 10% versus 2012.

personal income finished 2013 on a positive note. Improving personal income coupled with improving employment numbers are supportive of economic growth. Consumer sentiment still is deemed to be at low levels, likely the result of the Great Recession. However, in December the consumer savings rate (generally measured as a function of personal income versus personal spending) fell, which would seem to indicate sentiment will improve in nearby future quarters.

Record Year for the Dow, S&P and NASDAQ‌.. The Great Recession will likely affect the national psyche for a full generation. However, following an incredible $384 billion inflow into stockbased mutual funds, all three major indexes reached all-time historic levels with the Dow up 26%, the S&P up 29%, and the NASDAQ up 40%. Sentiment may make 2014 choppy, but projected Personal Income, Savings Rate, and Sengrowth should overcome emotion. timent end mixed. Local and National

vs. prior year

EMPLOYMENT FORECASTS

Jason M. Gant South Dakota Secretary of State State Capitol 500 East Capitol Avenue Pierre, SD 57501-5070

Note: Red line displays actual seasonally adjusted employment numbers. Source: Seasonally adjusted South Dakota total nonfarm employees from the Bureau of Labor Statistics and the Labor Market Information Center, SD Department of Labor.

1

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

Secretary’s Minute I am pleased to provide the public of South Dakota with the fourth quarter Economic Report for 2013. As reported in the previous quarterly Economic Report, South Dakota’s economy continues to remain strong as we move into the new calendar year. While the entire state has seen positive economic indicators throughout the previous year, one city in particular stands out with positive progress and economic development. Rapid City saw a banner year in 2013 with many fiscal highlights and increased growth. There was a boom in housing construction, and the number of total building permits were way up. Overall, the city saw an increase of new building revenue from $117 million in 2012 to $133 million in 2013. That is nearly double what was brought in during 2010. Rapid City continues an optimistic outlook toward the future with continued downtown improvement and plans toward expanding the airport to facilitate more domestic flights. The city continues to expand revenue and resources while investing in public works and saving taxpayers money through fiscal responsibility. I’d like to commend Rapid City on its outstanding progress during the last fiscal year, and I hope they are able to continue this growth through 2014 and beyond.

Q4 2013

Q3 2013

Q4 2012

Percent Change over Prior Year

5 Year CAGR*

New Entity Filings Domestic Limited Liability Company

943

868

1,160

-18.7%

10.8%

Domestic Nonprofit Corporation

74

77

70

5.7%

-0.3%

Domestic Business Corporation

208

160

205

1.5%

-3.1%

Other Entity Types

455

443

523

-13.0%

-0.8%

Total New Entity Filings

1,680

1,548

1,958

-14.2%

4.4%

Total New Entity Filings-12 mo. trailing

6,995

7,401

7,108

-1.6%

3.9%

89

120

71

25.4%

-

Trademarks-12 mo. trailing

442

424

428

3.3%

-

Trade Names

872

797

670

30.1%

8.4%

3,515

3,313

3,250

8.2%

4.3%

Other Business Filings Trademarks

Trade Names-12 mo. trailing

* Compound Annual Growth Rate 2

-

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

Entities in Good Standing, Trademark & Trade Name Filings Limited Liability Companies make up 43% of entities in good standing. An entity must file paperwork each year to ensure they remain in good standing. At the end of Q4 2013, 60,370 entities were in good standing with the Secretary of State’s office.

Trademark filings contracted in Q4 2013.

Safeguarding the symbols and words that an entity employs in commerce, trademark filings numbered 89 in Q4 2013, a 26% decrease over the prior quarter. Trademark filings for the 12 months ending Q4 2013 totaled 442, which was 3.3% higher than the previous year’s number.

Trade name filings increased in Q4 2013.

Entities must file a statement of trade name when operating under any name other than their true name. The South Dakota Secretary of State received 872 trade name filings in Q4 2013, an increase of 9.4% over the prior quarter.

3

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

South Dakota Economic Indicators South Dakota’s economic indicators continue to point towards strength and growth. At first glance, one could conclude that South Dakota may be headed in the wrong direction as downward trends versus Q3 2013 stand out as potential negatives. However, they are largely reflective of seasonal trends—annual wages show a decrease, while jobless claims and continuing claims show increases versus the prior quarter. When comparing those same measures against 2012, each of the numbers show improvement. Retail sales show a significant decline, which is the result of a 2012 downward revision reported by the SD Department of Revenue in Q4 2013. After adjusting for this revision, retail sales also show improvement.

What could prove to be a drag on South Dakota’s economy is the growing anti-ethanol sentiment. With 40% of corn production going into ethanol plants, corn acres comprising the largest acreages in South Dakota, and Renewable Fuel Standards under attack, South Dakota’s growth may be affected. Other sectors continue to improve with some regions experiencing record growth.

3 Months Prior

Percent Change over Prior Period

Annual Percent Change

5 Year CAGR*

0.7%

8.6%

4.2%

-8.8%

-17.0%

1.7%

1.3%

4.0%

3.5%

9,217

-2.8%

1.8%

2.6%

3.40

-2.4%

1.5%

15.7%

SOUTH DAKOTA

Current Period

Personal Income (millions of dollars)

39,593

39,321

Retail Sales, 12 mo. trailing (millions of dollars)

24,451

26,817

10,395

10,257

8,957 3.32 421,770

418,930

Wealth

Taxable Sales, 12 mo. trailing (millions of dollars) Business Outlays Annual Wages per Employee Retail Gasoline Price (dollars per gallon) Econom ic Overview Employment (in thousands) Unemployment Rate Initial Jobless Claims

3.7%

0.7%

1.5%

0.5%

3.9%

-5.1%

-14.0%

2.0%

469

234

100.4%

-13.8%

-10.4%

Continuing Jobless Claims

3,671

1,318

178.5%

-10.5%

-9.3%

Building Permits, Number of Units, 12 mo. trailing

5,192

5,323

-2.5%

24.3%

4.4%

713,809

715,583

-0.2%

14.1%

4.5%

243

237

2.5%

5.7%

1.7%

Valuation (thousands of dollars), 12 mo. trailing FHFA Purchase-Only Home Price Index Total Business Bankruptcy Filings

17

13

30.8%

70.0%

-8.2%

Chapter 7

14

8

75.0%

75.0%

-8.6%

Chapter 11

2

0.0%

0.0%

0.0%

Chapter 13

1

-50.0%

0.0%

-19.7%

2

So urces: B ureau o f Eco no mic A nalysis, Quarterly P erso nal Inco me (SA )(Q3/13); So uth Dako ta Department o f Revenue (NSA ) (11/13); So uth Dako ta Department o f Labo r and Regulatio n (SA ) (Q2/13); US Energy Info rmatio n A dministratio n, Weekly Retail Gaso line and Diesel P rices, M idwest (12/30/13); B ureau o f Labo r Statistics, CES (SA ) (11/13); US Department o f Labo r, Emplo yment and Training A dministratio n (NSA ) (12/28/13); Census B ureau, New P rivately Owned Ho using Units A utho rized (NSA ) (11/13); FHFA P urchaseOnly Ho me P rice Index (SA ) (Q3/13); A dministrative Office o f the US Co urts (Q3/13). *Co mpo und A nnual Gro wth Rate.

4

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

National Economic Indicators Nationally, full bore ahead? Overall, most national indicators reflect moderated growth and improvement. Remember the fiscal cliff and government shutdown? Some economists argue that 2013 Q4 GDP growth would have ended at, or very close to, 4% without the effect of the shutdown. The discussion nationally is that the “new normal” growth rate should average between 2 and 4%. What will remain to be seen is the effect of the tapering of the Fed’s Quantitative Easing (QE) policies. The effect of QE largely relieved bank balance sheets of mortgage backed securities.

Unwinding the ballooning of the Fed’s QE balance sheet could prove a painful experience, and may very well be pushed to future generations to figure out. To put it simply, the tab on the housing bubble has not yet been paid. Although home prices appreciated in 2013, some economists argue that the increases were largely the result of record-low mortgage rates. Median household income is still below home prices and will need to grow when comparing them against home prices before the housing market will be able to fully recover.

Source: U. S. Census Bureau

NATIONAL

Current Period

Wealth Personal Income (billions of dollars) Retail Sales, 12 mo. trailing (billions of dollars) S&P 500 Business Outlays Annual Wages per Employee Consumer Price Index Energy Transportation Services Retail Gasoline Price (dollars per gallon) Econom ic Overview Real Gross Domestic Output (billions of chained 2009 dollars) Employment (in thousands) Unemployment Rate Initial Jobless Claims Continuing Jobless Claims Building Permits, Number of Units, 12 mo. trailing Valuation (millions of dollars), 12 mo. trailing FHFA Home Price Index Total Business Bankruptcy Filings Chapter 7 Chapter 11 Chapter 13

3 Months Prior

Percent Change over Prior Period

Annual Percent Change

5 Year CAGR*

14,181 4,519.3 1,848.4

14,033 4,476.9 1,681.6

1.1% 0.9% 9.9%

2.9% 4.4% 29.6%

2.6% 2.6% 15.4%

11,973 234.6 246.3 281.7 3.41

12,857 233.9 247.8 280.2 3.50

-6.9% 0.3% -0.6% 0.5% -2.6%

2.1% 1.5% 0.4% 1.7% 1.2%

1.8% 2.1% 6.9% 2.7% 15.1%

1.0% 0.4% -2.8% 10.7% -2.9% 2.5% 3.7% 2.0% -8.5% -11.3% -2.2% -3.7%

2.0% 1.7% -10.3% -8.3% -11.5% 17.7% 24.1% 8.4% -12.2% -16.4% -1.8% -4.6%

0.2% 0.3% -10.3% -9.1% 0.4% 3.2% 0.0% -6.7% -7.7% -4.4% -6.6%

15,839 136,747 7.0% 341,000 2,817,000 958,600 170,110 203.0 8,119 5,314 1,983 701

15,680 136,166 7.2% 308,000 2,902,000 935,200 164,085 199.1 8,874 5,989 2,028 728

-

-

So urces: B ureau o f Eco no mic A nalysis, Quarterly P erso nal Inco me (SA )(Q3/13); US Census B ureau (NSA ) (11/13); Yaho o Finance (12/31/13); B ureau o f Labo r Statistics, QCEW (NSA ) (Q2/13); B ureau o f Labo r Statistics, A ll Urban Co nsumers, US City A verage (SA ) (12/13); US Energy Info rmatio n A dministratio n, Weekly Retail Gaso line and Diesel P rices (12/30/13); B ureau o f Eco no mic A nalysis (SA ) (Q3/13); B ureau o f Labo r Statistics, CES (SA ) (Q4/13); US Department o f Labo r, Emplo yment and Training A dministratio n (SA ) (12/21/13); Census B ureau, New P rivately Owned Ho using Units A utho rized (NSA ) (11/13); FHFA P urchase-Only Ho me P rice Index (SA ) (Q3/13); A dministrative Office o f the US Co urts (Q3/13). *Co mpo und A nnual Gro wth Rate.

The Quarterly Business & Economic Indicators, produced by Northern State University on behalf of the South Dakota Secretary of State, in conjunction with MacKenzie Madison Analytics, reports on the correlations between various business filing data and economic metrics. The Labor Market Information Center of the South Dakota Department of Labor and Regulation is a contributing partner of the Quarterly Business & Economic Indicators report.

5