I’ve heard from multiple sources that Rochester, MN is ‘recession proof’. Being that I am in an industry that’s been gravely impacted by recessions (especially the last one), I can’t say I was disappointed to hear the great news. But, (there’s always a but) I wanted to dig into this further. Did Rochester remain untouched during the recession? Is it reasonable to assume that Rochester, MN will overcome the next recession (especially with Mayo Clinic and Destination Medical Center present)? Let’s find out.
As my father always told me, the best indicator of the future is looking at the past. So I started my research by reviewing publications from the Rochester Post Bulletin and the city’s public Budget Summaries from 2007 to 2009. And you know what? For the most part, Rochester was quite resilient during the Great Recession, which lasted from December 2007 through June 2009. For example, according to an investigative reporter from the Post Bulletin, Rochester didn’t enter the recession until January of 2009 (two years after the Great Recession started). Obviously, the Mayo Clinic, which employs roughly one third of Rochester’s population, was a huge (or possibly the) contributing factor to this.
At this point, we know Rochester shielded itself for years from the recession. But, how about the rest of Minnesota? The MN Department of Employment and Economic Development stated that employment between 2007 and 2008 rose by just 0.1% in Rochester, MN making it the only major metropolitan area in MN with a positive figure. Duluth, St. Cloud, and the Twin Cities reported a decline of -1.7%, -1.4%, and -2.4% respectively.
Mayo Clinic is the healthcare mecca and the largest MN resident employer. With that being said, it’s difficult to compare Rochester, MN to Duluth, MN because of the major impact healthcare as a whole has on a community like Rochester. So now I find myself asking, was this phenomenon specific to the Mayo Clinic? The answer - no. One way to measure this is by looking at employment within the healthcare industry as a whole between 2007 and 2010. According to the U.S. Bureau of Labor Statistics, between 2007 and 2010, all private industries in New York County experienced a decline in employment of -4.0%. The healthcare employment rate was up 0.9% in that same time frame. In Los Angeles Country, all private industries experienced a decline of -9.0% in employment, with the healthcare industry up 6% during that time. In total, US private industries experienced an employment decline of -6.9%, while US healthcare enjoyed a whopping 6.6% growth in employment from 2007 to 2010. Don’t get me wrong, I am a firm believer that Mayo Clinic is one of the top healthcare institutions in the world. However, healthcare as a whole tends to be a defensive sector. More on that later.
What about the rest of us? Yes, there are some of us in the Rochester workforce that are NOT employed by the fortress. Shocking, I know...well, during the recession, Rochester’s construction and home sales were down, which ultimately means less in the pockets for those in residential and commercial real estate. We also found an article in the Pioneer Press stating IBM laid off some of it’s Rochester workers in January of 2009. Not only that, but the Per Capita Personal Income in Rochester, MN was $40,650/yr in 2008 and declined to $40,053 in 2009. Unemployment was 3.4% in November 2007 before peaking at 7.5% in March 2010. However, the Quarterly Census of Employment and Wages (QCEW) tool on mn.gov taught us that the Olmsted County government employees annual weekly wage increased each year from 2007 to 2011. However, using that same tool with the private sector, we found a decline in wages between the years of 2010 and 2011.
The other major aspect of the 2007-2009 Great Recession was the impact it had on the US and Global stock market. It-don’t-matter where you were, who you work for, or what your income level was; if you had a diversified portfolio you likely experienced one of the greatest investment portfolio declines of your life (16 months in duration and a decline of over -50%). The decisions made during this time could very well impact a Rochesterian more than a decline in income or even unemployment. Being prepared (both financially and emotionally) for our next recession is something we discuss with all of our clients, whether they live in Rochester or not!
So is Rochester, MN recession proof? No, and that’s O.K. See, I like to think of a recession a lot like a natural forest fire. It’s a necessary part of an ecosystem, and allows for new growth after the fact. Since Rochester’s last ‘forest fire’ in 2009, it has flourished. Recessions have a tendency to provide a new landscape for individuals and businesses.
So, although Rochester, MN may not be recession proof, it’s built to withstand the storm that will inevitably come.
Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.