Friday Five: What Minnesota businesses are telling us about growth

By Doug Loon
President and CEO
Minnesota Chamber of Commerce

Doug Loon (DL): Welcome to a special segment of the Minnesota Business Podcast. Doug Loon here, coming to you after another great week at the Chamber.

I'm thrilled to have with me the Chamber's Senior Director of Economic Development and Research, Sean O'Neil. He's been with us before on this program. He's our lead researcher on economic issues at the Chamber, under the Chamber's Foundation, and he leads our Grow Minnesota! program, which is our version of economic development, focused on business retention and expansion in partnership with local chambers and economic development groups around the state.

They get in and work with businesses, help them understand their concerns and bring solutions to their challenges.

We're thrilled to share with you a new report brought to you by the Grow Minnesota! program. It's our 2026 Business Retention and Expansion report. This is a series of reports we've been doing for the last couple of years. This updated version has some new data based on survey information we collected from businesses across the state to give us a pulse on where businesses are today and some of their expansion or contraction plans in the state.

So, Sean, thank you for being with me.

Sean O'Neil (SO): Thank you, Doug.

DL: Before we jump into the details, help me understand why the Chamber has this business retention strategy and why it matters to the state at this time.

SO: Our Foundation has been putting out this report every year since 2023. The purpose is to look at an underexamined part of our economy, which is business expansion activity.

When a company decides it's going to expand, build a new facility or double its footprint, that activity isn't necessarily captured in official economic statistics. At the same time, it's really important to our economy for a couple of reasons. First, you get the economic activity from those expansions themselves. But they can also act as a market signal because these companies are making intentional decisions to expand in one location over another. That can tell us something about our underlying competitiveness, including our challenges and advantages.

We wanted to put out a report that tracks how many companies are expanding in Minnesota, how that's changing over time and whether more or fewer companies are expanding here. We also look at how Minnesota compares to other parts of the country.

We're now on our third iteration of this report, tracking this kind of activity and talking directly to companies about what matters to them as they look to grow and expand. Are there barriers they face to doing that here? That's what we set out to do.

DL: Before we jump into the conclusions or the direction the report points us, what inputs do you use to develop it? Is it the survey I mentioned, government reports or a combination?

SO: We have to use a combination of different sources to piece this together because, as I mentioned, there aren't existing core economic statistics on these expansion projects.

We use a few different third-party sources that compile public announcements of when companies are expanding, so we can get a directional sense of how many projects are occurring in Minnesota and how that compares to other places.

We also look at job creation in high-value, high-wage industries because that tells us whether we're growing in the sectors that really drive our economy forward.

Lastly, we conduct a survey and in-depth interviews with business leaders themselves to ask about more specific issues that matter to their growth here.

DL: Fantastic. So, what's the good news in the report that we can share today?

SO: There is good news, and we've seen it now for the past few years. As we track how many companies are expanding in Minnesota, we've had a pretty steady stream of businesses saying they're planning to build a new facility, add an addition or increase their overall production capacity.

In fact, over the most recent five-year period, a little over 500 companies announced plans to expand. In the five-year period before 2020, that number was 295. So we've seen a pretty steady increase in the number of companies announcing plans to expand here.

We also see growth in the total number of businesses operating in Minnesota. Some of that has to do with startup activity and new companies forming, but it could also be businesses adding a new location. Those are some positive trends we can point to.

DL: So, some helpful trend lines showing that we're increasing investment and business growth in the state. At the same time, what challenges does the report identify about Minnesota's position compared to other states?

SO: While we have some really exciting projects happening here and notable success stories of companies deciding to expand, when you look at the overall picture, we see some headwinds in growth in high-wage, advanced industries.

When you think about what makes Minnesota special from an economic competitiveness perspective and what really drives our economy, it's those sectors that can export outside the state, contribute significantly to research and development and innovation, and have a talented, skilled workforce. All those things help increase overall prosperity in our state.

But when we look at job growth in those sectors, we've actually had net job losses in the first half of this decade. That tells us that while some companies are still growing here, as a whole, we're seeing headwinds and declines in the sectors that are key to our economic competitiveness.

DL: As you look across the various sectors, are there some that are doing well compared to others where we might see a slowdown in investment here in Minnesota?

SO: We see continued growth in both capital expenditures and job creation in some areas that are key strengths for Minnesota, including medical technology, machinery manufacturing and a handful of other industrial sectors.

One of the big drivers has been investments related to AI and data infrastructure that's being built out nationally. We can see that happening in Minnesota in a few interesting ways.

First, semiconductor-related companies have been investing pretty heavily in their Minnesota operations, announcing close to a billion dollars in plant expansion activity over the past couple of years.

Second, there's been a lot of data center activity. Not all those projects have been built yet, and many are still in limbo. We'll see if they actually get done here, but companies are at least taking steps to try to build data centers in the state.

The third pillar, which is sometimes a little more hidden from view, is manufacturing investment tied to the data center buildout happening nationally. Companies are making equipment and technologies for data center cooling, large storage equipment and other things that go into these facilities.

So it's driving expansion activity more broadly than just the data centers themselves.

DL: Sean, from our previous conversations, including some on this podcast, we've talked about the necessary ingredients for economic growth, often measured in GDP. As we've discussed, we like to measure that in GDP per capita.

Attracting investment to the state is a key economic driver, and it's important whether that investment comes here or goes somewhere else. But it's also important to have a growing workforce. Even with the deployment of automation and AI, you still need a workforce.

As you think about the workforce outlook for the state and your survey, what are Minnesota's employers telling you about workforce challenges today and into the future?

SO: It's interesting. We really wanted to dig into this issue this year because, as we've surveyed companies over the past few years, one of their top concerns about their ability to expand in Minnesota has been whether they can access a skilled workforce.

Since around 2017, the share of companies saying they're having a hard time finding employees has risen to a critical threshold. More than two-thirds of companies say either they can't fill openings or it's harder to find employees when they have job openings.

We wanted to find out what companies are doing to solve that challenge so they can grow here.

We've had structurally tight labor markets over the past decade, with some ups and downs along the way, but overall, it's been hard for companies to hire.

That's really increased the incentive for businesses to focus on retaining and upskilling their existing workforce. Companies are putting more effort than ever into engaging and developing their current employees.

We heard about a broad range of strategies and tools companies are using. That includes internships and apprenticeship programs, partnerships with schools and community organizations, and internal development where businesses provide mentorship or training. That might mean connecting an experienced person on the production floor with someone who's newer to the company.

What that tells us is that companies aren't taking a one-size-fits-all approach or looking for one silver-bullet strategy. They're thinking broadly about how to cultivate a strong workforce.

DL: So they're innovating around workforce development to meet their needs, which I think is a unique feature of Minnesota. We've got to stay on that and keep tracking it.

Let's wrap up with a question about your recommendations to business executives and owners. What's the key takeaway from the report? What should we all think about going forward to make sure we remain competitive with other states around the country and in the global marketplace?

SO: There are a number of takeaways, but let me give you two.

First, where companies are expanding gives us forward-looking information about where the economy is headed. Companies make these investments with a long-term lens. They're building a new facility or making a large investment because they think it will be a winning bet for the company over the next five, 10 or 20 years.

When we see companies investing heavily in certain sectors, that tells us where growth might be headed within the state. If I were a business leader, I'd be interested in how to serve those growing markets and get connected to areas of the economy with solid growth projections. Expansion activity is one way to look at where we're going next.

The second takeaway, on the flip side, is that the headwinds around job losses in advanced sectors should be a wake-up call for Minnesota.

If we're going to be a competitive and highly prosperous state, we have to grow in the areas that contribute most significantly to the things we care about: innovation, good jobs, high wages and exporting products around the world.

All of that will be critical. We can't have a successful economy if we're losing ground in these advanced sectors. We have to find ways to build momentum.

DL: Well, that's some of the work of the Chamber, helping solve those challenges. We do that by deploying our research, which produces data that leads to recommendations for all of us to work on.

As we get ready for the 2027 legislative session, we're rolling out new reports that bring data and solutions into the discussion. We hope that can help build a trajectory for our state that increases investment here and develops a workforce ready to meet the need.

Sean, thank you for all your work at the Chamber, your leadership on our research and leading our Grow Minnesota! team. They're really important ingredients to our success and to the state's success. So thank you.

SO: Thank you, Doug.