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INDICATORS

Fourth Quarter 2013

PUBLISHED BY NORTHERN STATE UNIVERSITY SCHOOL OF BUSINESS

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. vs. prior year

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 fil-ings could be the beginning of a moder-ate 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 aver-aged 3.7%, beating the four year best mark set just last quarter. The continu-ous 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 nation-al number improved by over 10% versus 2012.

Personal Income, Savings Rate, and Sen-timent end mixed. Local and National

personal income finished 2013 on a posi-tive 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 spend-ing) 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 in-credible $384 billion inflow into stock-based mutual funds, all three major in-dexes 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 growth should overcome emotion.

A Stellar End to 2013

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.

EMPLOYMENT FORECASTS

South Dakota Secretary of State

QUARTERLY BUSINESS & ECONOMIC INDICATORS

Jason M. Gant

South Dakota Secretary of State

State Capitol

500 East Capitol Avenue

Pierre, SD 57501-5070

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South Dakota Secretary of State QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

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 through-out the previous year, one city in particular stands out with positive progress and economic develop-ment. 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 dou-ble 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 tax-payers money through fiscal responsibility. I’d like to commend Rapid City on its outstanding progress dur-ing the last fiscal year, and I hope they are able to continue this growth through 2014 and beyond.

Secretary’s Minute

* Compound Annual Growth Rate

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%

Other Business Filings

Trademarks 89 120 71 25.4% - -

Trademarks-12 mo. trailing 442 424 428 3.3% - -

Trade Names 872 797 670 30.1% 8.4%

Trade Names-12 mo. trailing 3,515 3,313 3,250 8.2% 4.3%

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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% de-crease 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 oth-er 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.

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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 reflec-tive 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 im-provement. 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 econo-my 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 Re-newable Fuel Standards under attack, South Dakota’s growth may be affected. Other sectors continue to im-prove with some regions experiencing record growth.

SOUTH DAKOTA Current Period

3 Months

Prior

Percent Change

over Prior Period

Annual Percent

Change

5 Year

CAGR*

Wealth

Personal Income (millions of dollars) 39,593 39,321 0.7% 8.6% 4.2%

Retail Sales, 12 mo. trailing (millions of dollars) 24,451 26,817 -8.8% -17.0% 1.7%

Taxable Sales, 12 mo. trailing (millions of dollars) 10,395 10,257 1.3% 4.0% 3.5%

Business Outlays

Annual Wages per Employee 8,957 9,217 -2.8% 1.8% 2.6%

Retail Gasoline Price (dollars per gallon) 3.32 3.40 -2.4% 1.5% 15.7%

Economic Overview

Employment (in thousands) 421,770 418,930 0.7% 1.5% 0.5%

Unemployment Rate 3.7% 3.9% -5.1% -14.0% 2.0%

Initial Jobless Claims 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%

Valuation (thousands of dollars), 12 mo. trailing 713,809 715,583 -0.2% 14.1% 4.5%

FHFA Purchase-Only Home Price Index 243 237 2.5% 5.7% 1.7%

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 2 -50.0% 0.0% -19.7%

Sources: Bureau of Economic Analysis, Quarterly Personal Income (SA)(Q3/13); South Dakota Department of Revenue (NSA) (11/13); South Dakota Department of Labor and

Regulation (SA) (Q2/13); US Energy Information Administration, Weekly Retail Gasoline and Diesel Prices, M idwest (12/30/13); Bureau of Labor Statistics, CES (SA) (11/13); US

Department of Labor, Employment and Training Administration (NSA) (12/28/13); Census Bureau, New Privately Owned Housing Units Authorized (NSA) (11/13); FHFA Purchase-

Only Home Price Index (SA) (Q3/13); Administrative Office of the US Courts (Q3/13). *Compound Annual Growth Rate.

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South Dakota Secretary of State QUARTERLY BUSINESS & ECONOMIC INDICATORS Q4 2013

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 In-formation Center of the South Dakota Department of Labor and Regulation is a contributing partner of the Quarterly Business & Economic Indicators report.

Nationally, full bore ahead? Overall, most national indicators reflect moderated growth and improvement. Remember the fis-cal 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 large-ly 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 in-come is still below home prices and will need to grow when com-paring them against home prices before the housing market will be able to fully recover.

National Economic Indicators

NATIONAL Current Period

3 Months

Prior

Percent Change

over Prior Period

Annual Percent

Change

5 Year

CAGR*

Wealth

Personal Income (billions of dollars) 14,181 14,033 1.1% 2.9% 2.6%

Retail Sales, 12 mo. trailing (billions of dollars) 4,519.3 4,476.9 0.9% 4.4% 2.6%

S&P 500 1,848.4 1,681.6 9.9% 29.6% 15.4%

Business Outlays

Annual Wages per Employee 11,973 12,857 -6.9% 2.1% 1.8%

Consumer Price Index 234.6 233.9 0.3% 1.5% 2.1%

Energy 246.3 247.8 -0.6% 0.4% 6.9%

Transportation Services 281.7 280.2 0.5% 1.7% 2.7%

Retail Gasoline Price (dollars per gallon) 3.41 3.50 -2.6% 1.2% 15.1%

Economic Overview

Real Gross Domestic Output (billions of chained 2009 dollars) 15,839 15,680 1.0% 2.0% - -

Employment (in thousands) 136,747 136,166 0.4% 1.7% 0.2%

Unemployment Rate 7.0% 7.2% -2.8% -10.3% 0.3%

Initial Jobless Claims 341,000 308,000 10.7% -8.3% -10.3%

Continuing Jobless Claims 2,817,000 2,902,000 -2.9% -11.5% -9.1%

Building Permits, Number of Units, 12 mo. trailing 958,600 935,200 2.5% 17.7% 0.4%

Valuation (millions of dollars), 12 mo. trailing 170,110 164,085 3.7% 24.1% 3.2%

FHFA Home Price Index 203.0 199.1 2.0% 8.4% 0.0% -

Total Business Bankruptcy Filings 8,119 8,874 -8.5% -12.2% -6.7%

Chapter 7 5,314 5,989 -11.3% -16.4% -7.7%

Chapter 11 1,983 2,028 -2.2% -1.8% -4.4%

Chapter 13 701 728 -3.7% -4.6% -6.6%

Sources: Bureau of Economic Analysis, Quarterly Personal Income (SA)(Q3/13); US Census Bureau (NSA) (11/13); Yahoo Finance (12/31/13); Bureau of Labor Statistics, QCEW (NSA)

(Q2/13); Bureau of Labor Statistics, All Urban Consumers, US City Average (SA) (12/13); US Energy Information Administration, Weekly Retail Gasoline and Diesel Prices (12/30/13);

Bureau of Economic Analysis (SA) (Q3/13); Bureau of Labor Statistics, CES (SA) (Q4/13); US Department of Labor, Employment and Training Administration (SA) (12/21/13); Census

Bureau, New Privately Owned Housing Units Authorized (NSA) (11/13); FHFA Purchase-Only Home Price Index (SA) (Q3/13); Administrative Office of the US Courts (Q3/13).

*Compound Annual Growth Rate.

Source: U. S. Census Bureau