2024 Q3 Dakota Outlook

Changing Seasons and a Changing Economy

As we enter Autumn, the Dakota Institute is happy to bring you the latest issue of the Dakota Outlook. You could even say that this issue takes its cues from the changing of the seasons. The FED has recently changed course and has started a rate-cutting cycle. The country is only a month away from a presidential election that will bring political change of one sort or another to Washington. South Dakotans will be voting on several ballot measures and constitutional amendments that could bring dramatic change to our state as well. With so much potential change ahead, our fellows bring you more of the deep analysis and insight that the Dakota Institute is known for, so that our readers can better understand where we’ve been and where we might go from here.

First up we bring you an analysis of teacher pay in South Dakota. Eight years ago South Dakota’s lawmakers launched a major effort to boost teacher pay and put the state on a better path. The 2015 legislation that came out of that effort created the new half-penny sales tax to better fund teacher pay and created incentives for school districts to grow and maintain teacher pay. The data show that inflation and slow pay raises have hurt that effort, though, and teacher pay in South Dakota is once more falling behind. Teachers across the state have seen their salary gains eroded by inflation and small gains in nominal compensation have resulted in meaningful cuts to real wages.

Not all workers and industries have fared poorly in recent years, though. Over the last decade, South Dakota has demonstrated impressive resilience and steady workforce growth. Not only that, some of the state’s industries that were hardest hit by Covid have charged back to full strength and far surpassed their pre-Covid status. Annual employment growth averaged only 0.9% during the five years prior to the Covid pandemic. From 2021 through 2023, annual employment growth has averaged 2.8%, three times higher than before Covid. The Leisure and Hospitality and the Trade, Transportation, and Utilities sectors have been two of the state’s leading growth sectors.

Next up, this issue of the Dakota Outlook digs deep into the question of where many of our state’s new residents came from before became South Dakotans. South Dakota experienced a small population surge from 2020 through 2022, largely due to increased domestic and international migration. We could be seeing this trend slowing down, though, and the more recent contributor to population growth may be due to a declining number of deaths, always a welcome change. One of the more interesting insights in this issue is how many of the state’s current residents seem to be moving to Lincoln County.

Finally, we bring you an interesting exploration of South Dakota’s unusually strong housing market. The FED’s recent rate reductions may help new buyers to a small degree, but home prices in South Dakota are higher than ever. They also show no sign of falling soon. Median nominal home prices in South Dakota have risen by 80% in the last eight years. Only six other states saw their median home prices grow more quickly. We show evidence that strong demand from buyers continues to support South Dakota’s housing market. Median home prices in the state rose by $16,066 from 2023 through August of 2024. Only seven states saw prices rise by more.