State corporate filings hint that recovery is under way

In late 2005, at least a year before other economic indicators in Nevada began to flash red lights, the number of new corporations that filed paperwork with the Nevada Secretary of State began falling sharply.

Now that a newly created index shows that the number of new filings has begun to turn upward, Secretary of State Ross Miller's staff hopes the tool proves prescient in upturns as it did during the downturn.

The 13,801 new corporate filings with the Secretary of State's office during the fourth quarter marked an increase of 2.4 percent over the third quarter and a 2.8 percent over the fourth quarter of 2009.

That's significant in itself, said Applied Analysis, the Las Vegas company that crunches the data.

"New entity volumes turned positive for the first time since mid-2006, suggesting the worst may behind us," Applied Analysis wrote.

Miller said during an interview last week that a deeper dive into the number provides even more reason for optimism.

Among the files maintained by the Secretary of State's office are those for so-called "foreign filers" companies that are legally incorporated elsewhere, but file paperwork in Nevada once they're ready to begin active business operations within the state.

That means, Miller said, that an increase in foreign filings is likely to portend an increase in hiring by companies that are expanding their businesses to Nevada.

The number of new foreign filers picked up during the fourth quarter. For the full year, they ran 29.6 percent ahead of 2009's numbers.

Overall, that paperwork accounted for only about 7.4 percent of the corporate filings in the Secretary of State's office, but the proportion represented by foreign filings was up from 5.4 percent a year earlier.

Another sign that the recovery may be under way, Miller said, comes from data about the lists of managers, directors and officers that companies incorporated in Nevada are required to file each year.

The number of annual filings declines when companies go out of business, and the number of companies filing annual lists in Nevada fell by 1.8 percent in 2010 compared with 2009.

But Applied Analysis staff members said the decline appears to be flattening, providing more evidence that the economy is stabilizing.

Jeremy Aguero, principal in Applied Analysis, said the the research firm looked at 15 years of historical data and found that corporate filings with the Secretary of State's office provide meaningful insight.

And because corporate filings began turning south before the employment declines in the recessions that began in 2002 and 2008, the statistics may be an early warning sign of future economic instability, Aguero said.

Applied Analysis prepared the analysis at no cost to the state using data provided by the Office of the Secretary of State.

Miller said he plans to produce a quarterly report based on the business-filings data.