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Thursday, May 28, 2020

South Dakota: Crisis Response Done Right

Here is a quick update on employment numbers for yet another state out here in the West.

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During the coronavirus epidemic, Governor Kristi Noem of South Dakota took a firm approach to defending the liberties of her state's residents. She rejected the "herd mentality" of panic-driven shutdowns and she was quick to steer her state back to normal again, even with the limited measures in place in the Mount Rushmore State.

Governor Noem's strategy has paid off. While the private sector was suffering across the country, South Dakota took a relatively moderate blow to its economy. Even better is the fact that governments from the state down to municipalities actually decided to accommodate the decline in tax revenue. Unlike Colorado, and definitely unlike Wyoming, South Dakota made sure to adjust its government workforce to what hard-hit taxpayers could afford. In April, compared to March,

  • Private-sector employers laid off 26,100 workers, or 7.4 percent of all employees;
  • The state government cut 1,900 employees from its payroll, a 10.2-percent reduction;
  • Local governments reduced their workforce by 4,200 or 8.3 percent.

This means, plainly, that the Government Employment Ratio, GER, stayed the same, even declined a little bit:

In March this year, South Dakota had 198 state and local government workers per 1,000 private-sector workers;
In April, that ratio had declined to 195.

This is even a decline compared to April of 2016, when the GER stood at 196.

Just to show how easy it is to mismanage a state, the corresponding numbers in Wyoming are:

  • 294 for March 2020;
  • 290 for April 2019; and
  • 317 for April 2020.

While politicians in Wyoming have gone out of their way to protect government, Governor Kristi Noem and other fiscally conservative politicians in South Dakota decided to protect taxpayers.

That priority also shines through in her state's private-sector employment numbers. The total job loss in the private sector was, again, 7.4 percent, noticeably lower than the ten-percent decline in Wyoming.  

Let us take a look at employment changes from March to April, industry by industry. We start with the industries where South Dakota (the first number) outperformed Wyoming (second):

  • Private education services: -7.7 percent vs. -15.6 percent;
  • Information industry: zero vs. -3 percent;
  • Financial services: zero vs. -2.7 percent;
  • Wholesale: -1.9 percent vs. -3.7 percent;
  • Other services: -7.3 percent vs -10 percent;
  • Construction: +9 percent vs. +2.9 percent;
  • Mining: +10 percent vs. -8.1 percent; and
  • Leisure and hospitality ("tourism"): -37.8 percent vs. -41.1 percent.

In two cases the states were basically equal:

  • Professional and business services: -1.2 percent vs. -1.1 percent;
  • Manufacturing: -2.1 percent vs. -2 percent;

In three cases, South Dakota (first number) actually fared worse than Wyoming:
  • Health care and social assistance: -6.1 percent vs. -5.4 percent;
  • Retail: -6.8 percent vs. -5.3 percent;
  • Infrastructure: -9 percent vs. -2.7 percent;
Overall, though, the private sector in South Dakota went through April with much less scar tissue than in Wyoming. 

It remains to be seen how big of a blow the coronavirus crisis has dealt to government finances in South Dakota, but given these employment numbers it is reasonable to expect that Governor Noem has been able to cushion the impact of the crisis. Her decision not to panic-lockdown the state has apparently been coupled with a statewide recognition that in a crisis it is government's duty to protect taxpayers, not government. 

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