4 posts from July 2013

Newborn businesses crawling again, jobs not following in tow

It’s well known that starting a business is tough. New data on establishments suggest that entrepreneurs are starting to regain their appetite for risk after getting scared to the sidelines during the recession and slow recovery.

According to figures from the U.S. Census Bureau, the annual number of establishments that are less than one year old has been slowly rising. While still not above prerecession levels across Ninth District states, all states saw positive growth in 2012; for most, it was the second consecutive year (see Chart 1). For North Dakota, it was the second straight year of record new establishments.

New establishments Ch1 -- 7-31-13

It’s also well known that these young businesses are an important source of employment because young companies tend to be growing and thus require more labor compared with older companies (for those who need convincing, see the July 2011 fedgazette). Jobs have been rising at these young establishments, but the overall track record is a little less consistent and upbeat. For most district states, last year was the first real year of solid job growth (see Chart 2). These jobs declined last year in Wisconsin, its trend line zig-zagging since 2009 along with Minnesota’s.

New establishments Ch2 -- 7-31-13

Annual job levels are still well below prerecession levels in four states. That’s because average employment at these young establishments has been going down steadily (see Chart 3). Minnesota’s average employment has gone down by one and a half workers since 2007; Wisconsin and South Dakota saw a drop of almost one worker.

The exception to all the job trends is North Dakota, whose economy is the best in the country and comparable to almost no other state right now. Last year, both new establishments and total jobs at these businesses outstripped those of Montana, whose population is more than 40 percent larger. North Dakota even saw small growth in the average number of jobs per young establishment between 2007 and 2012.

New establishments Ch3 -- 7-31-13

City employment: Help wanted, maybe

While the evidence is modest, there are small signs of recovery in public employment, at least among some larger Ninth District cities.

Public employment is typically quite stable over time. During the Great Recession, it lagged the downward spiral of private employment thanks largely to the federal stimulus of 2009. Once those funds to local governments were spent, employment levels started falling across the nation and district and continued through 2012 (see January fedgazette for more discussion).

With many public budgets now rebounding, or at least getting out of serious deficits, some local governments appear willing to entertain the idea of adding staff. Employment figures were investigated for larger cities in the Ninth District with employment levels over 200 (the list is not exhaustive, as not all cities post recent budgets or employment figures online).

Among 20 cities with available data, employment estimates for fiscal year 2013 show the job bleeding has stopped, at least temporarily, and for some (see Chart 1). The combined employment of the 20 cities grew 0.4 percent—70 jobs—in FY2013 compared with a loss of about 275 jobs over the previous two fiscal years. Bismarck, N.D., saw easily the highest job growth, at 4.2 percent, but eight other cities saw modest growth, including both Minneapolis and St. Paul.

But it appears that many local governments are not quite out of the fiscal woods yet. Two cities saw no growth, and the balance of 18 cities was split evenly between positive and negative job growth in FY2013 (see Chart 2). Grand Forks, N.D., took the biggest hit, as city employment dropped 1.4 percent, according to city budget figures.

William Thomas, Minneapolis Fed intern, contributed data to this report.

  City employment charts 1-2 -- 7-23-13png

 City employment table (2) -- 7-23-13

A leaky drinking water system

The heat of summer is probably the best time to let you know your drinking water infrastructure is badly in need of some upgrades.

In 2011, the Environmental Protection Agency began a nationwide assessment of drinking water systems, randomly surveying more than 2,700 medium and large community water systems. The survey collected data on capital improvement projects that system respondents deemed necessary over the coming 20 years. Improvements included replacement or rehabilitation of existing infrastructure due to age or deterioration, as well as new or expanded infrastructure necessary for current population needs or to comply with regulatory requirements.

Last month, the EPA released its final report, which estimated nationwide needs of $376 billion, a slight increase in the amount identified in a similar 2007 survey ($369 billion). Among Ninth District states, the report pegged capital investment needs for Minnesota and Wisconsin at $7 billion and $6.7 billion, respectively. (These were the only district states with enough surveys to allow for a state-based breakdown.) Needs in Minnesota rose more than 8 percent from the 2007 survey, while Wisconsin drinking water needs rose by almost 2 percent.

The report broke down needs by system size as well as capital investment categories (distribution, treatment, etc.). The needs of the two states were very similar in terms of categories—for example, the majority of investment needs in both states lie in transportation and distribution systems (see Chart 1). But Minnesota has a larger need among medium-sized drinking water systems (see Chart 2).

Drinking water -- 7-17-13

North Dakota oil-grant money: Ask, and you might receive

Like the adage says, “There’s never enough free money.”

In the just-completed fiscal biennium, North Dakota created a new “oil impact” grant program to help communities in the western part of the state deal with the many effects of rapid oil development and staked it with $124 million in grant funding.

Communities lined up for money, according to data from the state Office of Management and Budget. Among close to 1,000 grant proposals, slightly more than half were awarded money. Local governments requested help across a wide range of public services, but the majority were for transportation, emergency services and public works (water and sewer projects; see Chart 1). These proposals also received the greatest number of approvals.

However, $124 million in awards leaned toward smaller-sized proposals instead of big-ticket items. While half of all proposals were funded, fewer than one in five dollars requested was ultimately allocated. In all, the program attracted proposals seeking about $660 million (see Chart 2). Public works proposals received close to three-quarters of all funds awarded, at $89 million; average grants ($1.9 million) dwarfed any other category.

For much more on the impacts of oil activity in North Dakota and how the state is spending considerable new revenues from oil production, see the forthcoming cover articles for the July fedgazette.

ND oil impact grants -- CH1-2