Economist: S.D. will keep growing, but slowly

South Dakota’s growth is expected to continue at a slow pace in the next two years, according to an economic outlook presented Thursday to the South Dakota Chamber of Commerce and Industry.

Mike Allgrunn, professor of economics at the University of South Dakota Beacom School of Business, forecast state GDP to grow at 1.9 percent this year and 2.4 percent in both 2017 and 2018.

“Everyone sorts of expects continued positive growth,” Allgrunn said. “There’s really no reason to think our growth is going to be constrained beyond what it has been. We do have tight labor markets, and that’s maybe the one thing that keeps us from growing at a faster pace.”

He is projecting 1.2 percent employment growth next year.

Nationally, most forecasts point to U.S. GDP growing about 2 percent as well.

“We are still sort of coming out of the Great Recession of 2008,” Allgrunn said. “We did not come out of this recession very quickly, and rather than the rapid growth you usually see during a recovery, we saw slow, relatively stagnant growth.”

In South Dakota, “it’s for the most part better,” he said. “We have seen employment growth in South Dakota, which is pretty impressive considering nearly everyone already has a job.”

The state’s labor market also is becoming more educated. For example, in 2006, about 17.6 percent of the population had a bachelor’s degree. In 2014, it was 20 percent.

“That’s probably a good thing in the long run for South Dakota,” Allgrunn said. “Higher education should lead to higher productivity and different types of jobs and higher wages. It can be difficult if you’re looking for people at the lower end of that as workers.”

Allgrunn also predicted the Federal Reserve would raise interest rates by one-quarter of a percent in December.

“We’ve had low inflation for a long time,” he said. “We are expecting that to increase slightly but at a low level, and we think the consumption level is going to slow down a bit.”

His presentation, though, had a qualifier. It was put together before Tuesday’s election.

“So all bets are off,” he said.