Gas prices, jobless rate both up locallyMitchell was hit with a double dose of bad economic news Friday as the average gas price in the city hit $3.479 and the unemployment rate spiked to 4.9 percent. The average gas price is about 20 cents higher than a week ago. The unemployment rate — which covers the month of January but was just released Friday — is up 0.8 percentage points from the previous month.
By: Seth Tupper, The Daily Republic
Mitchell was hit with a double dose of bad economic news Friday as the average gas price in the city hit $3.479 and the unemployment rate spiked to 4.9 percent.
The average gas price is about 20 cents higher than a week ago. The unemployment rate — which covers the month of January but was just released Friday — is up 0.8 percentage points from the previous month.
The bad news comes just weeks after it was announced that Mitchell had its highest-ever sales-tax collections in 2010, and the same day as news that the national unemployment rate fell to its lowest level in nearly two years.
“I think we have some mixed signals in the economy,” said Bryan Hisel, executive director of the Mitchell Area Chamber of Commerce and Mitchell Area Development Corporation.
Hisel said he remains optimistic about the local economy, because 4 percent unemployment is considered “full” employment in economic development circles. In other words, at any given moment, roughly 4 percent of the workers in a healthy economy are going to be out of work for various reasons.
The cause of January’s local jump in unemployment could include a general “leaning down” in the manufacturing and processing industries, Hisel said. He also suspects a seasonal impact.
“We have a tendency to slow down rather dramatically during the first quarter of the year,” he said. “The January, February and March period is our slowest period, and that’s true for most northern-tier states.”
Hisel said he does not think valuable conclusions can be drawn from one month’s worth of unemployment data, and he’ll be watching the trend over the longer term.
Looking backward, Mitchell has been experiencing higher-than-normal unemployment since the end of 2008. The rate was significantly higher from the end of 2008 to the middle of 2010, slightly lower but still above normal from last June to November, and higher again in December and January.
The rate was lower than 3 percent for 19 consecutive months leading up to the national economic recession. The recession’s effects appeared to creep into the local economy in November 2008, when the unemployment rate hit 3 percent on its way to a high of 6.8 percent in March 2009.
The rate dipped to 3.8 percent in October 2009, but otherwise remained above 4 percent until last June. That month’s 3.8 percent rate kicked off a run of six straight months below 4 percent, a streak that ended with the 4.1 percent rate in December and January’s jump to 4.9 percent.
Compared to the nation and state, Mitchell has a healthier employment situation. Non-seasonally adjusted rates, which are not adjusted for seasonal impacts from industries such as construction and tourism, must be used for the comparison because they’re the only city rates compiled by the state Department of Labor. The non-seasonally adjusted nationwide unemployment rate in January was 9.8 percent, and the statewide rate was 5.4 percent.
The rise in gas prices seemed more concerning than the rising unemployment to Hisel, who said energy prices “sweep through the whole economy.”
Dave Mitchell, a professor of business administration and economics at Dakota Wesleyan University, shares that concern.
“Any increase in a basic commodity puts a crimp in the ability of people to buy other things,” he said.
A Daily Republic staffer travels throughout the city every Friday to compile the average price of gas. Friday morning, prices ranged from $3.39 per gallon for regular unleaded at stations away from Interstate 90 to $3.59 per gallon at stations along I-90.
The statewide average price of gas Friday was $3.407, according to AAA, and the national average was $3.471.
Mitchell attributes the higher gas prices partly to anticipation of greater demand, with the arrival of spring and summer. The speculation market may also be contributing, he said, because speculators may be buying and holding in anticipation of higher prices, driven by unrest in the Middle East.
“Until the supply catches up with demand, you’re going to get price increases,” Mitchell said. “That’s just the way markets work.”
All the conflicting signals about the economy tell Hisel that the effects of the national recession are still reverberating throughout the country.
“The problems that started in ’07 and ’08 are still working their way through the national system,” Hisel said. “If there’s a shock to the system with price increases and inflation, most economists will tell you that’s a troubling scenario …
“There’s mixed information out there, and the way it turns will depend on the psychology of each of us. If we’re afraid and pull in, the economy will slow down. If we keep doing business and move forward and farm income is strong, we’ll have a good, strong year again.”