PIERRE, S.D. -- “South Dakota employment has been much better than we thought we could go without triggering inflation,” said Ron Wirtz, spokesman for the Minneapolis Federal Reserve, Monday, Nov. 26, during a Pierre Chamber of Commerce meeting.
Wirtz’ presentation also was given at the South Dakota Banking Commission meeting later that day. He said in terms of usability and understandability about the data used, “There are no better measures out there.”
He tempered the state’s overall economic flatness or comparative optimism with the state’s agriculture industry. “We don’t expect the farm economy to bounce back very quickly. Debt repayment is nearing its maximum level on the average farm,” Wirtz said. “The 2018 South Dakota agriculture forecast is the lowest it has been in 15 years. Chapter 12 bankruptcies are increasing.”
Of the 12 districts that make up the Federal Reserve system, South Dakota is in the Ninth District (Minneapolis Fed) which also includes Minnesota, Montana, North Dakota and parts of Wisconsin and Michigan. Wirtz tracks and assesses current business conditions, focusing on recent sales/revenue trends, employment, wages and prices.
“The South Dakota economy is slower, but not everywhere. Agriculture is dragging,” Wirtz said. “It is the trajectory, the momentum, that matters more. Economic growth in South Dakota has been flatter; point eight percent compared to 2.9% for the United States as a whole.” He said that in South Dakota, finance and insurance are declining, as is agriculture. A tiny aspect of the information industry -- internet technology -- is up, as is all of the health care industry.
“Rapid City and Sioux Falls have been keeping up with with the U.S., but not with other major cities in the Ninth District. For economic growth, Rapid City and Sioux Falls are up. The rest of South Dakota is down. As far as the farm economy, cash receipts as well as production expenses are both up. The farm earnings are down,” Wirtz said.
South Dakota has not seen the drop in job growth as much as have other states, and Wirtz is a touch optimistic there might be a very slight uptick in the near future. “Sioux Falls has been on a tear for job creation. If you look at non-metro counties, you have not seen growth,” Wirtz said.
“Goods -- manufacturing and construction and farming -- are only 16 percent of all jobs in the area. Service jobs are where most jobs are growing, but not as much in South Dakota,” Wirtz said. “I see this everywhere I go; jobs are available -- declining, but there are still plenty of jobs out there.”
“The median income is still rising and very steadily since 2010. It appears there is a faster wage growth in rural areas,” Wirtz said.
“Workforce, workforce, workforce. It is a large determinate of how fast you grow. You have to hire more people to increase productivity,” Wirtz said. He mentioned one exception. During the last recession people were losing their jobs. Workers were scared of losing theirs and worked harder, thus there was a bit more productivity. But, it was a economic recession. “The faster the labor growth, the faster the economy, such as in Sioux Falls. South Dakota’s core working group -- the 24-64 age group -- is growing barely at all. The 65 and over group is working more; people are not retiring.”
What lies ahead? “Farm prices will influence South Dakota’s economy. Other than the farm; unemployment is low with a steady hiring demand. Hiring demand can change quickly -- you hire or decide not to hire -- but the labor supply changes very slowly,” Wirtz said.
After stating South Dakota’s ultra-low unemployment was below three percent, he stressed that the labor force is those people who have looked for work in the past 12 months, not those people who could work but for some reason are not looking or working.
“The long term outlook is for tight labor. You can do nothing and accept slower growth. You can increase productivity, but if we knew how to do that we would. You can subsidize fertility but that is an 18-year delay to supplement the workforce. You can allow/encourage immigration. You can encourage people to work; the Native American unemployment is incredibly high. In 2016 it was 24 percent. They are under-utilized, so either an opportunity or a challenge for the economy. Since 2000, three of every eight new workers is non-caucasian.”
In a re-cap Wirtz said the South Dakota gross domestic product is sluggish. There is slow agriculture. Metros are doing better than all other areas. There is very low unemployment. South Dakota can increase the workforce through wages, better career opportunities, and ways to bring people into the workforce, such as housing, transportation, daycare and other job-related necessities.