ECONOMIC INDICATORS POINT TO SOUTH DAKOTA’S ECONOMY SLOWING DOWN IN COMING MONTHS

SIOUX FALLS, S.D. (Bart Pfankuch / South Dakota News Watch) – So far in the post-pandemic period, the South Dakota economy is humming along nicely, though some new economic indicators reveal concerns that growth might slow in the coming months or years.

According to a recent financial forecast produced by the Governor’s Council of Economic Advisors, many data points show the state has been in a very strong financial position in regard to housing, employment, income and gross domestic production.

However, three economic experts asked by News Watch to review and analyze the state forecast said the almost unprecedented growth seen since the COVID-19 pandemic in 2020 appears to be tapering off.

“I’d say our economy has grown very strongly over the last three years, uncharacteristically strongly, and this year, we are seeing kind of a reversion to the mean, kind of a return to more of the normal, if you will,” said Jared McEntaffer, CEO of the Dakota Institute, a nonprofit group focused on analyzing and aiding the South Dakota economy.

New data points underscore challenges

Furthermore, the experts said a few indicators in the recent state report should be watched closely, as they carry potential warning signs for the future.

Chief among those concerning indicators:

A somewhat stark drop in overall farm income since 2022 that can cause negative ripple effects across the entire state economy.

Lower-than-expected state sales tax collections in June and July, which could portend a crisis if that trend continues – especially if voters decide in November to end the sales tax on consumable goods.

The vast divide between the roughly 30,000 open jobs in the state and the 10,000 unemployed people in the workforce, which can stall business growth and productivity.

The state’s 2% unemployment rate, which could lead to employers hoarding existing workers and preventing businesses from being able to expand or grow.

A steady slide in growth rate in personal incomes since 2021.

A slip in gross domestic product growth in 2024 that may be the result of other economic factors that are slowing growth overall in the state.

Despite those results, McEntaffer said that, “There’s no red flags that I’m seeing that jump out to me and say, ‘Hey, we could be looking at a change in fortunes in South Dakota.’”

Here is an at-a-glance look at a few economic indicators that the economists highlighted in the Aug. 29, 2024, report.

Farm incomes fall from peak

According to the state report, overall farm income in South Dakota was around $700 million in 2006, then rose to $3.7 billion in 2011 before dropping to about $1.2 billion in 2016-17. When the pandemic hit in 2020, however, demand and commodity prices both rose sharply and as a result, so did farm income, reaching $3.7 billion in 2021 and peaking at $4.4 billion in 2022.

Since then, however, prices have come down and overall farm income fell as well, to $3.8 billion in 2023, with prices for corn and soybeans continuing to decline in 2024. Spending on farm equipment also dipped in 2023, the state report showed.

Joe Santos, a macro economics professor at South Dakota State University, said commodity prices paid to state farmers rose sharply during the COVID-19 pandemic and when war broke out in Ukraine, due to the loss of production of grain in Ukraine and the initial disruption of supply lines that drove up demand.

“Obviously, we don’t want to see a pandemic, and we’d love to see peace in Ukraine,” he said. “But without those pressures, prices will sort of ease. And while they won’t go into the toilet, they won’t be where they were when you had a pandemic and the belligerent activity that drove up commodity prices.”

The dip in farm incomes and the resulting negative outcomes statewide are good examples of how the South Dakota economy is often tied to external forces and events, Santos said.

“I think the way you’re going to see sluggishness in terms of economic activity in the state is probably going to be imported, in that the economic activity of this state reflects activity outside the state,” Santos said. “I think that’s probably our greatest vulnerability in South Dakota, in the state’s sensitivity to economic activity outside the state.”

Pluses and minuses of low unemployment

South Dakota is in an unusual position when it comes to its employment picture.

According to state data, non-farm employment growth has risen sharply since hitting a 12-year low point during the height of the pandemic in 2020, when the state had about 350,000 people working. Since then, non-farm employment has risen to about 470,000 people working, an increase that is only slightly below the national employment rate.

Meanwhile, the unemployment rate in South Dakota, which was about 3.5% in 2014 and which rose to 8.5% during the pandemic, has now fallen to around 2%, according to state data. The national unemployment rate has followed a similar pattern, jumping to more than 14% in 2020 and now hovering around 4.5%.

All three economists interviewed by News Watch pointed to the low unemployment rate as a problem, though generally a good problem to have.

Santos called the low unemployment rate a “second-order problem,” that is less impactful than high unemployment, which would make it hard for people who want to work to find jobs.

But Santos also said an unemployment rate of 2% or lower could create a soft spot in the state economy.

“I think the downside is that the economic activity in the state is constrained by its inability to attract workers,” Santos said.

David Chicoine, a former president and economics professor at South Dakota State University, said economists across the country are trying to determine what level of unemployment is acceptable to sustain larger economic growth.

“The question that has come up since COVID and since the Great Recession, is what is the appropriate level of unemployment to have a robust economy?” he said. “Clearly, 2% is, in most people’s view, too low because that means you don’t have enough workers to take advantage of new opportunities and sustain long-term growth.”

Worker shortage a concern

The other, somewhat related, concerning data point is that the state has about 33,000 open jobs and 10,000 unemployed people, which Chicoine said can stunt productivity and growth in the business sector.

That gap exists even as the state has seen population growth of 1.5% in 2022 and more than 1% in 2023, both rates that outpaced national growth.

“I still think the economy is going to grow, but at what pace?” he said. “If you’ve got more jobs than you have people, that’s going to put a constraint on the ability to grow because you’re just not going to be able to have the output of a stronger labor force.”

McEntaffer said the lack of workforce is largely due to the geography and demographics of South Dakota, which is a rural, low population state compared to other states.

Other than increasing innovation or raising productivity of individual workers, the only way to fill open jobs is to attract more people to the state, he said.

“It is putting restrictions for businesses and consumers,” McEntaffer said. “We’re right to do what we can to attract people. It’s a strong economy, it’s a great place to live and all of that, and if we can get more people here, that will help alleviate some of those strains on the economy.”

General fund revenues

After two years of consistently steady growth in revenues, buoyed by billions in federal government stimulus money given to the state and local governments, businesses and individuals, revenue growth slowed in June.

In July, the state experienced a decline in revenues compared to legislative estimates. The June data shows an increase of just 0.4% over legislative estimates, and July saw a 3.7% negative growth figure, with a $9 million shortfall compared to legislative projections.

Chicoine said the recent slowdown is not a major concern unless the trend continues beyond the end of the state’s fiscal year in June 2025. TK

“If we flatten out for the rest of the year, and we’re already down in the first month of the new fiscal year (July), we won’t know the full magnitude of any decline until we get there,” Chicoine said. “The negative growth that we saw suggests the downward trend could continue and accelerate.”

Housing prices and construction

South Dakota followed the national housing market fairly closely in recent years, especially in growth rate of home construction and prices.

The home price indices, a broad measure of average home sale and resale prices, rose slowly in South Dakota and the U.S. from 2012 to 2021, then showed a significant price jump over the past three years.

Construction of new homes in South Dakota dipped to about 3,000 in 2019, then peaked at about 9,000 in 2022 and came down to about 4,000 in 2023 with a slight uptick since.

Santos said he believes the Federal Reserve Board has taken appropriate steps in regard to managing lending rates to reduce inflation and stave off a possible recession in the U.S. and in South Dakota.

Rising interest rates in recent years, followed by the recent lowering of rates, was appropriate, he said. The lower rates should now stimulate more residential and commercial development and sales activity that will bolster the overall economies of the state and nation, Santos said.

In their final analysis, all three economists said they see a positive economic future for South Dakota.

Santos said he expects the state to continue to benefit from government policies that generally tend to be pro-business and pro-growth.

“There is a kind of a deregulatory, pro-free enterprise mindset in the state, and I suspect that’s a tailwind, not headwind,” he said. “There is a kind of a business-first orientation that if we have issues, let’s see if the private sector can deal with them first.”

 

IOWA PRISON EMPLOYEE UNION SAYS REFORMS ARE NEEDED FOR THE SAFETY OF CORRECTIONAL OFFICERS

DES MOINES, IA – A labor union representing Iowa’s corrections workers is calling on the state to pass reforms because they say officers are at risk.

Last week, an inmate attacked two officers at the Iowa State Penitentiary in Fort Madison. WGEM reports that one officer suffered facial fractures and was taken to the hospital. The inmate used a metal table leg to stab the other officer 10 times. His shirt was cut open and he suffered minor scrapes.

AFSCME, the prison officers’ union, says that so far this year, there have been more than 150 assaults on prison officers.

They say these attacks underscore concerns about staffing and a lack of resources.

At a press conference today, AFSCME Council 61 president Todd Copley called on state leaders to pass three key demands.

First, they want increased staffing to reduce the workload on staff and increase safety.

Second, they want safety protocols in state prisons to be improved in prisons to protect staff from these attacks.

Third, they want their collective bargaining restored. Republicans in the legislature limited certain union rights for public employees in 2017. They say restoring their negotiating rights will allow their employees to advocate for safer working conditions and better staff treatment.

“Governor Reynolds this is a direct message to you: You have the power to fix this and the responsibility to act. The safety of Iowa’s correctional officers and all public employees rests in your hands,” Copley said.

Mason Mauro, a spokesman for Governor Reynolds, says she’s worked to increase safety at Iowa’s prisons since 2021.

“Governor Reynolds knows Iowa’s correctional officers work in an inherently hostile environment. It is why she has worked diligently with the Iowa Department of Corrections to improve safety and security at our state prisons. In 2021, the Iowa Department of Corrections commissioned a comprehensive review of prison safety and security by an independent third party and since then has implemented a number of safety and security improvements to include a new Director of Prisoner Operations, technology improvements, 85 new positions, K-9 teams, and additional security training. To achieve this, Gov. Reynolds approved a $20.5 million increase to the IDOC budget in 2021. Gov. Reynolds also approved an increase in starting wages for correctional officers in July 2024. Last month, the overall vacancy rate among Iowa correctional officers hit the lowest rate it has been in two years.”

“Moving forward, the Iowa Department of Corrections is committed to analyzing and assessing its security protocols and making upgrades where necessary. The department also investigates all security incidents to identify potential risks in facility operations and improve security protocols to manage risk and increase safety among staff and prisoners. Director Skinner is in regular communication with correctional officers and their union representatives to hear their concerns and explore pragmatic and productive solutions.”

Iowa Department of Corrections Director Beth Skinner says she regularly talks with the union president about working conditions.

“An open-door policy is vital for effective leadership,” said Director Skinner. “I am always open to dialogue and eager to listen to the concerns of our staff. Their insights are invaluable as we work together to improve our department.”

The Iowa Department of Corrections is pushing back on some of the claims made by the union. A spokesperson says that only five assaults this year have been classified as serious. He also says the number of serious assaults in Iowa prisons has declined over the past 10 years.

 

SOUTH DAKOTA TRIBES FILING SUIT AGAINST SOCIALMEDIA COMPANIES

SIOUX FALLS, S.D. (Dakota News Now) – Earlier this year, a group of federally-recognized Native American tribes filed complaints against major social media companies alleging that social media addiction is fueling a mental health crisis on reservations.

Six tribes from across the nation have joined the first-of-its-kind lawsuit since April, including the Sisseton-Wahpeton Oyate Tribe.

The latest tribe to file against Meta and parent companies of Snapchat, TikTok, and YouTube is the Standing Rock Sioux Tribe.

The tribes said they worry about the effect social media is having on the mental health of tribal members.

American Indian Law and Policy Group Chair and attorney with Robins Kaplan Tim Purdon is helping represent the tribes.

“The lawsuits allege that the business practices of these social media companies lead to negative mental health outcomes for teens, increased suicide rates,” Purdon explained.

Those suicide rates are nearly three-and-a-half times higher than the national average.

The tribes called social media content addictive and harmful and said the platforms are negligent because they are responsible.

“Teens in tribal communities, reservation communities, are uniquely vulnerable, exceptionally vulnerable to these negative mental health outcomes, and these business practices of these social media companies are contributing to really devastating outcomes,” Purdon said.

Dakota News Now reached out to the companies in the lawsuit. Only two responded.

Snapchat said:

“We designed Snapchat as a place to communicate with a close circle of friends, with built-in safety guardrails, and have made deliberate design choices to make it difficult for strangers to discover minors on our service. We continue to evolve our safety mechanisms and policies, from leveraging advanced technology to detect and block certain activity, to prohibiting friending from suspicious accounts, to working alongside law enforcement and government agencies, among so much more.

“We care deeply about our work here and it pains us when bad actors abuse our service. We know that no one person, agency, or company can advance this work alone, which is why we are working collaboratively across the industry, government, and law enforcement to exchange information and concept stronger defenses.”

YouTube and Google parent company Alphabet said:

“Providing young people with a safer, healthier experience has always been core to our work. In collaboration with youth, mental health and parenting experts, we built services and policies to provide young people with age-appropriate experiences, and parents with robust controls. The allegations in this complaint are simply not true.”

The lawsuits will be heard by a California judge at a later date. This comes as concerns have been growing about the effect social media is having on society as a whole and the tribes are far from the only ones to file complaints.

“They’re part of a larger litigation effort in this area. 42 state attorneys general have filed these lawsuits. You now have six tribes. There are dozens and dozens of school districts across the country that have filed these lawsuits. Negative mental health outcomes for teens and the public health crisis flow from the business practices of these social media companies. This is not just tribes that are fighting back against this. The United States Surgeon General has recommended that certain social media sites be accompanied by a warning label, much the same way as we eventually had warning labels on cigarettes,” Purdon said. “This is a public health crisis. Unfortunately, it’s taken the courts and litigation, entities like attorneys general, tribes being willing to step forward in the litigation arena to try and solve these problems.”

Purdon said that he has had conversations with dozens of other tribes and would not be surprised if when the cases are brought before the judge, there are more tribes included.

 

CHILD PORNOGRAPHY CHARGES FILED AGAINST FORMER SIOUX FALLS TEACHER

SIOUX FALLS, S.D. – A former Sioux Falls middle school teacher faces 20 new child porn charges.

According to documents filed in federal court, the alleged crimes had been happening significantly longer than investigators originally thought.

We first told you about Justin Preuschl in March, when he was charged with solicitation of a minor and lost his teaching job.

The case eventually moved to federal court, where Preuschl was initially accused of committing 16 crimes between June of 2023 and January of this year.

He’s now charged with 36 counts, beginning in December of 2022.

The US Attorney’s office says he posed as a 15-year-old boy online and pressured multiple girls to send him sexually explicit materials. He also attempted to send them pornography.

Preuschl was employed at Whittier Middle School at the time of some of the alleged crimes.