BROOKINGS While Brookings and South Dakota have strong economic indicators, headwinds abound.
Speakers Joe Santos and Jared McEntaffer shed light on those topics and more during the Brookings Economic Summit on April 29. Santos is a professor at South Dakota State University and directs the Ness School of Management and Economics there, while McEntaffer is the CEO and chief economist at Sioux Falls-based Dakota Institute. Hes also an SDSU graduate.
State economy
Following years of growth, there are causes for concern.
McEntaffer said while optimism exists, real growth has been negative in South Dakota over the past year.
South Dakota ranked 48th, 49th in terms of growth in the nation in the last three quarters, he said. Basically, were in this negative territory. The economy contracted in real terms.
He said its kind of hard to square that information with some of the optimism hes still hearing from some businesses.
It seems like the business community is still in the slow to cautious growth mode, but maybe the consumers are pulling back a little bit more, McEntaffer said. I think thats whats kind of showing up in the sales tax numbers. Consumer spending seems to be down, but business spending and investment seems to be the bright side for right now.
Trade policies, tariffs
Santos said all of the attention right now is on the U.S. trade deficit with other nations, which is roughly 3% to 4% of Americas overall gross domestic product. It exists due to several factors, including domestic ones:
Households that consume, rather than save.
The federal government spends, and doesnt tax sufficiently to cover said spending.
Another way to think about it, he said, is we eat all of our GDP on net, and then we eat a little bit of someone elses GDP.
Ultimately, Santos said it comes down to this: After Americans are done buying the worlds stuff, the world ends up with a lot of dollars, which then need to be socked away somewhere and that somewhere generally is reinvestment in Americas economy.
The fact that we have a trade deficit implies that the rest of the world is buying our financial securities theyre putting their dollars back into our economy, Santos said. This is a very symbiotic relationship one that economists dont tend to lose a lot of sleep over. We simply see trade as a production technology its a way that we get stuff turned into other stuff.
Basically, tariffs have the potential to act as grit in the gears.
Santos used a bit of humor to further illustrate the topic, quipping that he has a trade deficit with his dentist, since hes never cleaned his dentists teeth, but his dentist has cleaned Santoss chompers.
I dont go in there storming and say, John, darn it, when do I get to clean your teeth?! I have a trade deficit with my dentist and I never thought about that until right now, he said amid laughter from the audience.
South Dakotans work hard
When it comes to work, people in South Dakota are no slouches, and it shows in the numbers. For starters, Santos noted that personal income per capita is slightly higher than the national rate.
This number is influenced by factors such as the employment rate its currently about 98% in South Dakota which is about high as it can get. Theres also the labor force participation rate, which in South Dakota is much higher than the national rate. Finally, a third factor is personal income per worker.
Its sort of productivity plus, Santos said. Were working really hard. Employment rate is very high. Labor force participation rate is very high. I think long term what were probably going to need to focus on is how we change personal income per employee again, thats important for that labor productivity, getting each worker to be more efficient.
Santos said odds are slim to nil those numbers can go higher.
McEntaffer said, in addition to South Dakota, other states with high labor force participation rates are North Dakota, Iowa and Nebraska and theyve circled around the top for over a decade. Theyre the highest in the nation; theres no real slack there.
South Dakota is also one of the top states in another category: Its residents are known for working more than one job.
Theres no people on the sidelines, McEntaffer said. The economy is running as hot as it can and we need to worry more about getting people here.
Empowering Brookings
On a local level, there is cause for optimism. The biggest positive, Santos said, is SDSU.
Education is a great equalizer, and we are in a city with one of the best institutions I know of, and if that sounds biased, tough, he said to laughter. We have a fantastic university here, with rightfully aggressive aspirations in terms of being creators of knowledge and that is going to be what makes the difference.
As for industries that would fit best within Brookings, Santos said imperfectly competitive ones are the best option ones where theres some price-making, but theres also some competition. He cited Nike as an example: Theres a lot of shoes out there, and Nike is a well-known name, but it also faces competition, so it retains incentives to innovate.
McEntaffer said Brookings has high potential.
The ability for this community to attract and potentially retain a few more students every year theres so few communities that have this sort of influx of people that are touching a community, can develop connections with businesses that are here and potentially stay, he said.
I dont think the benefit of that can ever really be overstated.
Contact Mondell Keck at [email protected].
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