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Warning signs found in new South Dakota economic data

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Warning signs found in new South Dakota economic data


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.

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South Dakota saw $4.96 billion in tourism spending in 2023, with 14.7 million visitors. Increasingly, more of them are drawn to the 14 counties in and around Sioux Falls.

“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.

chart visualization

  • 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.

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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.

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South Dakota recently became the top producer of hemp fibers after being the third-to-last state to make it legal just three years ago.

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.”

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A flooded field in South Dakota
The agriculture industry in South Dakota has faced some financial headwinds, including flooding that occurred on this Campbell County farm property east of Herreid, S.D., on June 8, 2022. (Photo: Stu Whitney / South Dakota News Watch)

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.

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.

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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.

South Dakota economy by the numbers infobox

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 had about 33,000 open jobs in mid-2023 and only 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.

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“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.

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“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.

Canned groceries are lined up on shelves at a grocery store.
Even though the state economy overall has been strong in recent years, South Dakota consumers have undoubtedly noticed higher prices for food during a recent period of high inflation, including on April 25, 2024, at Maynard’s Food Center in DeSmet, S.D. (Photo: Bart Pfankuch / South Dakota News Watch)

Chicoine said the recent slowdown is not a major concern unless the trend continues.

“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.

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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.

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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.”

This story was produced by South Dakota News Watch, an independent, nonprofit news organization. Read more in-depth stories at sdnewswatch.org and sign up for an email every few days to get stories as soon as they’re published. Contact Bart Pfankuch at bart.pfankuch@sdnewswatch.org.



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South Dakota

Lawmaker panel set to back app store and device-based age verification for minors • South Dakota Searchlight

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Lawmaker panel set to back app store and device-based age verification for minors • South Dakota Searchlight


Companies that run app stores or make mobile phones and tablets could be required to verify the age of their users in South Dakota under the terms of legislative proposals presented Wednesday in Pierre.

Lawmakers with the Study Committee on Artificial Intelligence and Regulation of Internet Access by Minors voted unanimously to ask the state Legislative Research Council to draft the two “age gating” bills for presentation during the 2025 legislative session, which starts in January.

South Dakota attorney general tells lawmakers to consider age verification for porn sites

Committee members heard testimony for and against the age verification strategy during the seven-hour hearing. A representative from Facebook parent company Meta and online safety advocates were among those to support the ideas; trade group representatives for app developers and other tech companies came out against them.

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No state has passed laws for app- or device-based age verification, but Meta is among the players to have signaled support for the idea, and U.S. Rep. John James, R-Michigan, has introduced a bill on app-based verification in Congress.

“This is a bipartisan idea, a common sense idea,” said John Schweppe, policy director for the Virginia-based American Principles Project, which he described as “a pro-family conservative group. “It’s been something that folks have frankly agreed on for a long time, that we should be able to protect kids from harmful material online.”

Schweppe pointed to the passage of age verification laws in 19 states that put the burden for verification on websites or social media companies. The South Dakota House of Representatives passed a similar bill this year, but it was killed in a Senate committee.
Other states’ bills have faced legal challenges from tech companies, which argue they violate the First Amendment rights of adults. One such law out of Texas currently awaits a hearing from the U.S. Supreme Court.

Proposals pitched as ‘one and done’ age verification

App-based age verification would require app stores run by companies like Apple or Google to offer parental control features, many of which are already available. App stores would be required to take “commercially reasonable and technically feasible steps” to determine or estimate a user’s age and to require those younger than 16 to get a parent’s permission before downloading apps to mobile devices. 

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The law would require app stores to send “a digital signal” to websites, applications or online services to say if a person accessing them is younger than 13 years of age, between 13 and 16, between 16 and 18, or older than 18. 

Companies that develop apps, meanwhile, would be required to use that information to “provide readily available features” that would allow parents to limit their child’s time on the app, see who their “friends” are on social media apps, to see who their children are messaging with and who their children have blocked.

The device-based age verification proposal would include the same requirements for app stores, but would also require device-makers to try and determine a user’s age and send digital signals.

Some social media apps already offer parental control features similar to those that would be required under such a proposal. Meta recently rolled out a series of updates to Instagram meant to offer more control to parents and more restrictive experiences for teen accounts.

Nicole Lopez, who oversees youth safety policy for Meta, appeared in person at the South Dakota Capitol building Wednesday to outline some of those features and pledge its support for the app-based age verification proposal. 

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“While Meta has a robust, multi-layered approach to determining one’s age, we are only one part of the online ecosystem,” Lopez said. “The reality is kids are not only getting smartphones at increasingly younger ages, but they hop from app to app to app to app.”

One study from the University of Michigan, Lopez said, found that teens access an average of 40 apps a week. An app-based age control system “will not only make it easier on parents, but it will empower them when it comes to overseeing their teens’ experiences online.” 

Joel Thayer, president of the bipartisan Digital Progress Institute, said an app store-based system could be the simplest way to add guardrails against the ills of social media. 

“The evidence is staggering,” Thayer said, that “social media is harmful to children. He cited a recent call for a warning label on social media from the U.S. surgeon general and a host of statistics tying depression, body image issues and spikes in suicidal thoughts by teens to spending five or more hours a day on social media.

“The good news is that states like yours can take action,” Thayer said. 

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An app store-based system with digital signals “presents a one-and-done solution for apps. 

“You only prove it to the app store once,” he said.

Opponents: Free speech concerns, unintended consequences

Kristian Stout of the Portland, Oregon-based nonprofit International Center for Law and Economics testified against the proposal. App store data on user ages can be unreliable, he said, and forcing companies to expend resources to create digital signals could stifle innovation in smaller companies. 

Stout also talked through a few of the ways users can bypass digital signals. Users can switch their mobile browser to desktop mode, for example, “which makes a website think you’re not on a mobile device,” thereby preventing mobile device signals – and their associated age-gating content restrictions – from being sent when a user tries to access adult content from an app like Reddit.

“Smart kids know how to do this,” Stout said. “If I know how to do it and I’m 47, my 16-year-old son definitely knows how to do this.

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Stout was also among the witnesses to encourage lawmakers to consider an approach that would place a premium on educating parents and children about online safety and the existing tools to track youth behavior. 

‘Firehose’ of information confronts legislators studying internet use by children and AI

Justin Hill of NetChoice, a tech company trade association, told lawmakers that it’s unnecessary to pass laws that might fail a First Amendment test when so many options already exist for parents.

“The devices already do all the things that were said today,” Hill said.

Hill’s organization also submitted written testimony opposing app-based age verification, as did the Computer and Communications Industry Association in a letter submitted to the Legislature.

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That organization’s policy director, Khara Boender, testified that digital literacy is key. She also talked about the bills’ assumptions regarding traditional family structures in a country where not all children live with their parents, and how the device-based proposal raises questions about how the law would handle devices that aren’t purchased new.

“When a cousin or sibling graduates from college and they get a new phone for a graduation gift, they may be transferring that phone down to a younger sibling, where we need to actually ensure that the protections and device settings that currently exist are turned on correctly,” Boender said.

Two proposals garner committee support

Committee members had four versions of the age verification bills to review Wednesday. One focused on app store-based age verification, another on app store- and device-based verification. Each of those would level civil and criminal penalties against non-compliant companies. 

Another version of the app store-based proposal only applied civil penalties. 

Yet another proposal would revive the 2024 bill that would have required website-based age verification to access adult content. That bill was sponsored by Rep. Bethany Soye, R-Sioux Falls, who is also a committee member. On Wednesday, she voiced concerns that app store-based age-gating would fail to address the issue of minors accessing pornography on web browsers. Others testified along those same lines, arguing that South Dakota’s failure to advance that bill was a stain on its reputation as a state that cares about kids.

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“I think we need to stop talking about it and start being about it,” said Karen McNeal, an independent state Senate candidate from Rapid City.

The committee voted unanimously to send the first two proposals — containing civil and criminal penalties — to the Legislative Research Council for drafting. They also voted to send a bill that would define artificial intelligence under state law to the council. 

Committee vice-chairman, Republican Rep. Mike Weisgram of Fort Pierre, said the endorsements wouldn’t prevent individual lawmakers from sponsoring the remaining proposals.

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$42,000 lawsuit settlement adds to costs of Noem-ordered border deployments • South Dakota Searchlight

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,000 lawsuit settlement adds to costs of Noem-ordered border deployments • South Dakota Searchlight


South Dakota Republican Gov. Kristi Noem’s troop deployments to the nation’s southern border now have another cost: $42,000 to settle a lawsuit over a watchdog group’s document request.

The federal government recently paid the money from funds earmarked for the South Dakota National Guard, according to a National Guard spokesman.

The money went to Citizens for Responsibility and Ethics in Washington, known by the acronym CREW, in Washington, D.C. The nonprofit’s work “targets government officials who sacrifice the common good to special interests and personal gain,” according to its website.

In 2021, Noem deployed 48 Guard troops to help secure the U.S.-Mexico border, using $1 million donated by Republican billionaire Willis Johnson, of Tennessee.

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States including SD pledging hundreds of troops and spending millions to help Texas at the border

CREW submitted a Freedom of Information Act request seeking documents related to the donation and deployment. The South Dakota National Guard denied the request, and CREW filed a lawsuit against the Guard and the U.S. Army. 

The nonprofit ultimately obtained records showing the deployment cost the state nearly $500,000 beyond the $1 million donation. Email records showed that Jeff Marlette, then the state’s adjutant general of the National Guard, was involved in framing Noem’s language about the donation and deployment despite saying publicly that he was unaware of the donation until after the deployment was planned.

CREW criticized the donation and deployment in a news release last year.

“The use of the private donation to activate the troops was widely covered in national media not only as unprecedented, but also unethical and legally dubious,” CREW said.

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CREW’s lawsuit sought not only the release of the documents but also payment for the organization’s costs and attorney fees. The litigation remained pending until this September, when the parties told a judge they had reached a settlement. The settlement is not included in the public court file, but South Dakota Searchlight obtained it through a records request to the South Dakota National Guard. 

The donation-funded deployment was one of three that Noem ordered to the nation’s southern border from 2021 through this year. The state spent $2.7 million on those deployments through May, according to the state Department of Public Safety. 

The Johnson donation covered $1 million of those costs, and Noem tapped South Dakota’s Emergency and Disaster Fund to cover the rest. Although the troops were deployed to assist the state of Texas secure its border, Noem has said she will not ask Texas for reimbursement.

Settlement Agreement redacted

 

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South Dakota

FEMA Disaster Recovery Centers close this week

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FEMA Disaster Recovery Centers close this week


It’s the last week to register in-person for FEMA assistance in person at a Disaster Recovery Center.

The agency has already approved $8,255,543 in assistance across four South Dakota counties, officials said Monday. That amount is across 1,310 applicants.

The disaster centers in Lincoln and Union County both close October 4 at 6 p.m. Individuals can still apply online.

FEMA is also holding mitigation advice events this week at Olson’s Ace Hardware in Beresford. From Oct. 2 through Oct. 5, specialists can help answer questions on how to prevent damage from future disasters, techniques for rebuilding homes, and how to help owners and renters reduce disaster risk.

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