By Tim Krohn
The Free Press
MANKATO
January 04, 2009 01:13 am
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It’s been a year most businesses would like to forget.
With everyone from the president-elect to most economists saying the economy will get worse before it gets better, executives up and down the Minnesota River Valley are looking for efficiencies, creative approaches and ways to maintain and even grow as 2009 begins.
While the recession is causing pain in every sector of the local economy, all things are not equal. Some businesses are growing, some are more sheltered from the drop-off than others, and some are being battered.
Several leaders working in the primary economic engines of the area — health care, manufacturing, and higher education — give their views on the year ahead.
Manufacturing doing OK
With nearly one-third of the nine-county region’s payroll tied to manufacturing, the state of the industry is particularly important.
Although the manufacturing is being hurt, most companies are in a position to withstand the challenges.
“They’re looking at ’09 to be a pretty skinny year. They’re planning for the worst and hoping for the best,” said Greg Thomas, business development specialist with Enterprise Minnesota, formerly Minnesota Technology Inc.
“It’s obviously a challenging time, but most of the folks I talk to are doing OK and expect to do OK in 2009.”
Thomas said most manufacturers have added efficiencies to their operations in recent years and have been conservative.
“Most manufacturers in this area are cautious about labor expansion and investments. Most that we work with are cautiously optimistic and actively looking for ways for their business to grow.”
Thomas estimates about two of five manufacturers will face temporary layoffs if the recession is sustained long in 2009. “But I think once things improve, they’ll come back.”
Minnesota manufacturers are better weathering the storm because of a strong export market that has been developed in the state, Thomas said. Minnesota companies exported $15 billion of goods last year.
Commercial realty: Value counts
The decline in new home construction and sales of existing homes has been significant in the area, and the slow economy is hitting commercial real estate as well.
Tim Lidstrom of Lidstrom Commercial Realtors said they are still leasing and selling land and buildings for retail, industrial and offices, but at a slower pace than 2007 and 2006.
“Good sites or buildings, reasonably priced, will always generate interest and sales. Mankato has traditionally been a value market. Retailers and businesses alike have recognized the consumers that are spending the $1 billion in our market,” Lidstrom said.
“Whether on durable goods, food or toys for our grandchildren, we are looking for value. The same principle translates to commercial real estate sales. Your property doesn’t have to be an A-plus site, but it needs to be priced accordingly.”
Lidstrom said Blue Earth and Nicollet counties remain in better shape overall because of the diversity of the economy.
Lidstrom said they are doing a variety of things to move property in a slow economy. “Regular advertising in various print media, Internet sites and involvement with trade organizations all help to get the word out about opportunities in our area.”
Higher ed bracing
With the state’s deficit possibly in the $6 billion range by the time the revised February forecast comes, colleges and universities know a big hit is coming.
“We expect a 7 to 15 percent cut,” said Richard Davenport, president of Minnesota State University.
It is estimated MSU’s local economic impact is about $377 million annually.
Keith Stover, president of South Central College, said they are looking at options for the expected budget cuts. “We’re in the planning mode and we know it’s going to be tough on any college or university in the system.”
But Stover said cutting higher education comes at a time it is more needed than ever.
“In an economic downturn it’s more difficult to find a temporary job, so that sends more students to college. That requires more resources not less,” Stover said. “Higher ed is the real answer to the economic recovery of our state.
“With the economy dropped, we have an opportunity to upgrade skills so people can go back into the jobs that are hot, where there is growth. There are companies growing right now, even though many are struggling,” Stover said.
Davenport said unlike state cuts of a few years ago that were largely offset by double-digit tuition increases, no one wants to look to students to cover budget cuts.
“The tuition increases will probably be in the 2 to 3 percent range,” Davenport said. “None of the presidents, the (MnSCU) board or the public has the stomach for tuition increases.”
Davenport said reductions in travel and other cuts also are likely on campus. Because of union contracts, reducing faculty, he said, is very difficult unless a campus gets to a certain financial deficit threshold.
“We have no hiring freeze yet, but that may come,” he said.
SCC has about 5,600 students on its North Mankato and Faribault campuses and expects enrollment to grow about 5 percent this year.
Besides full-time students, SCC caters to about 16,000 non-credit students who come to pick up new skills for the jobs they are in.
In spite of budget challenges, Stover said they are focusing on expanding some programs at SCC, which became a comprehensive community and technical college in 2005.
The demand for nurses continues to be a focus. SCC has about 100 nursing students on its two campuses.
“Nursing is the largest, hottest of all the occupations right now. It’s hard to get into nursing programs,” he said.
“We’d also like to expand agricultural programs. On the ag side, there’s an upswing in the economy.”
This story is featured in the January MN Valley Business magazine. To see the entire issue online go to www.mvbusiness.net.
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