Minnesota, California, Delaware Have Bubblier Economies Than South Dakota

Contrary to Governor Kristi Noem’s persistent lie, South Dakota does not have the “strongest economy in America“. We don’t even have the most dynamic economy in America. According to the Economic Innovation Group’s Index of State Dynamism,

On a scale from a high of 47.7 in Delaware to a low of 11.1 in West Virginia, South Dakota scored 31.2 for economic dynamism in 2020, ranking 22nd in the nation. Nebraska, North Dakota, and Iowa scored lower, but Montana, Wyoming, and those socialists in Minnesota scored higher.

None of our neighbors make the top 10:

…or the worst 10:

South Dakota’s just kind of stuck in the middle.

EIG figures eight factors into its dynamism scores:

1. Core startup rate, measuring new firm launches across sectors, emphasizing diverse business opportunities.
2. Share of workers at firms less than five years old, which tend to innovate more and grow faster than older firms.
3. Growth in total firms, which signals more opportunity and more competition.
4. Patents per 1,000 residents, which indicates creativity and research producing results.
5. Housing permits per 1,000 residents, indicating that an economy offers enough opportunity to encourage talent to come, stay, and invest in the community.
6. Reallocation rate, measuring how much workers change jobs. Churn may be bad within a firm, but across the economy, job-switching spreads ideas and innovation, signals competitive wages, and shows that there are fewer barriers keeping workers from seeking jobs that fit better with their talents and interests and thus at which workers will be happier and more productive.
7. Labor force participation rate, showing that the economy offers lots of opportunities and attracts workers, especially young workers, to seize those opportunities.
8. Migration rate, because adding people by itself means there will be more economic opportunity.

EIG says South Dakota strongest metric is housing permits, which have outpaced the national average for most of the last three decades. Out labor force participation rate also consistently beats the national average. But our patents and core startup rates are consistently below the national averages.

Minnesota’s strongest metric is patents, currently running at double the national rate. Minnesota also has a consistently strong labor force participation rate. The metrics where Minnesota is consistently and notably weaker than the national average are share of workers at young firms and reallocation rate.

South Dakota’s average economic dynamism score during Noem’s first two years in office, 2019 and 2020, was 30.3, tying the average score during Dennis Daugaard’s eight years of governing. As in the rest of the country, South Dakota’s economic dynamism was much higher 20–30 years ago, so South Dakota’s highest average dynamism scores, averaging 38.7 under the second Janklow Administration, only produced an average national ranking of 34. South Dakota’s dynamism didn’t slide as fast as the rest of the nation’s in the Great Recession, so the 37.0 average dynamism score during Marion Michael Rounds’s gubernatoriate managed to push South Dakota’s average rank up to 21, the best seen under any of the four recent governors.

It takes strength to be dynamic, to shake and bake. South Dakota’s middling dynamism, led by people building houses and dragged down by a lack of inventiveness, is more evidence that “strongest economy in the nation!” is false advertising.