104 posts categorized "South Dakota"

Per capita income race: It’s North Dakota by a length

Personal income growth slowed last year for many states. And then there is North Dakota.

Nationwide, personal income increased by 2.6 percent last year, down from 4.2 percent in 2012, according to estimates from the U.S. Bureau of Economic Analysis. While every state saw total personal income rise at least 1.5 percent, North Dakota was doing laps around the rest of the field with 7.6 percent growth, almost double the next fastest rate (Utah, 4 percent). Among Ninth District states (highlighted in dark red in the chart), South Dakota saw the smallest increase, at 1.8 percent.

In fact, North Dakota has been among the leaders in income growth for more than a decade. From 2003 through 2013, personal income in the state has risen at a compound annual rate of 6.8 percent (not adjusted for inflation), according to BEA figures. That’s 50 percent faster than the next closest state (Louisiana, 4.45 percent). Other district states saw annual compound growth of between 2.3 percent (Michigan) and 3.9 percent (South Dakota). Over this period, North Dakota has climbed from 37th in per capita income in the country to third ($57,000), behind only the District of Columbia and Connecticut.

BEA personal income 2013 Ch1

Foreign students helping to meet demand for STEM graduates

Nationwide and in the district, there’s widespread concern that colleges and universities aren’t producing enough STEM (science, technology, engineering and mathematics) workers.

Whether or not the district faces a STEM crunch—an inadequate supply of STEM graduates to meet employer demand—students from other countries account for a significant and rising share of STEM degrees awarded by higher education institutions in the region.

In 2012, about 7 percent of bachelor’s degrees awarded by district institutions in STEM fields such as computer science and engineering went to international students, according to the National Center for Education Statistics (see chart). There was marked variation among states, with North Dakota posting a foreign-awards rate almost five times higher than South Dakota's. The U.S. average was 5 percent.

The share of STEM bachelor’s degrees earned by international students has increased since the Great Recession, outpacing overall growth in foreign four-year degrees. The proportion of STEM master’s degrees and doctorates earned by foreign students is much higher—about 40 percent districtwide—but has declined slightly over the past decade.

International college enrollment has risen in the district since the mid-2000s, slowed only briefly by the recession. Many foreign students, including those from countries such as China and Korea that score high in math and science on international tests, opt to pursue STEM majors. U.S. students are less likely to declare majors in STEM fields—hence, efforts by educators, employers and others to increase the number of homegrown STEM graduates.

For much more on STEM education and international students, watch for the upcoming April issue of the fedgazette.

Foreign STEM degrees -- 3-12-14

March madness: ACA enrollments racing to sign-up goal

The March 31st deadline to sign-up for private health insurance plans as part of the Affordable Care Act is fast approaching, and enrollments in some states are sprinting toward their projected goals while others are lagging, according to data released last week by the U.S. Department of Health and Human Services.

As of March 1, enrollments in Michigan and Wisconsin are at 90 percent of enrollments projected by HHS before the new law’s launch (see chart). In contrast, fewer than 7,000 people have enrolled in South Dakota, or just 36 percent of its 19,000 projection. Minnesota is the only district state that constructed its own health plan exchange (all others are using the federal healthcare.gov exchange). Enrollment in private plans to date through the MNsure exchange was just 48 percent of the goal of 67,000.

States and the federal government are also keeping a close eye on the number and proportion of young people signing up. For health insurance markets to work efficiently, the number of younger (and healthier, actuarially speaking) enrollees has to balance out the number of older, less healthy enrollees. It was originally estimated that 18 to 34 year olds would make up 35 to 40 percent of all enrollees. So far, it’s just 25 percent, and has remained fairly consistent in monthly reports. Among district states, only about one in five Wisconsin enrollees are in this young age bracket, while South Dakota has one of the highest rates, at 29 percent.

ACA March update -- 3-17-14

Stop being so negative: Rising prices help underwater mortgages

Last year is generally regarded as a strong year for housing, with improved activity in starts for new single-family units, higher sales of existing homes and rising prices. Those rising prices are good not only for sellers, but for existing homeowners with a mortgage, because rising prices mean more equity.

Last year saw a dramatic drop in the percentage of mortgages with negative and near-negative equity, according to CoreLogic, a property information, analytics and services company. Negative equity is when the balance of the mortgage is more than the value of the home; near-negative equity has a loan-to-value ratio of between 95 percent and 100 percent. Nevada, for example, saw a 41 percent decline in negative and near-negative equity in 2013. The bad news for Nevada is that its final rate of 33.5 percent was still the highest in the country (see chart).

Ninth District states fare comparatively well on mortgage equity measures. North Dakota not only has the lowest rate of mortgages with negative and near-negative equity, it has held the top spot for two consecutive years. Montana holds the fourth-best ranking, and both states saw small improvements in 2013. Minnesota ranks 21st in the country and saw the percentage of underwater and nearly underwater mortgages drop from 21.5 percent to 13.2 percent. Wisconsin’s 2013 rate is still comparatively high and saw only modest improvement over 2012. While Michigan continues to have one of the highest rates in the country, it saw the fourth-best improvement of any state in 2013. No data were available on South Dakota.

Negative equity -- 3-13-14

Strong 2013 for Ninth District mid-cap stocks

While 2014 is off to a rocky start, stocks of mid-cap companies in the Ninth District had a strong year in 2013 with a 27 percent gain, similar to the 28 percent increase in the S&P MidCap 400 Index (see chart, at bottom).

In 2013, growth was broad-based, with all sectors reporting net increases in market capitalizations. But certain sectors stood out. Almost a quarter of the total market value added was accounted for by growth in the technology sector, led by Stratasys, a manufacturer of 3D printers based in Eden Prairie, Minn., which posted strong gains in market capitalization and prices during this period.

Industrial goods, utilities and services sectors also had robust increases in market value. Buffalo Wild Wings doubled its market valuation from $1.4 billion to $2.8 billion; MDU Resources Group, a diversified utilities and energy-related services provider based in North Dakota, saw its market cap increase by 41 percent ($1.7 billion) in 2013, while the market value of Polaris Industries, a Minnesota-based manufacturer of snowmobiles and off-road vehicles, grew 70 percent ($4.1 billion).

Strong overall growth notwithstanding, a few companies in the district decreased in value during 2013, including the Minnesota-based logistics company C.H. Robinson Worldwide, which lost 14 percent ($1.5 billion) of its market capitalization during the year.

While 2013 was strong, the first month of 2014 saw Ninth District stock values decline by 6 percent, while the S&P MidCap 400 Index decreased by 2 percent. Grocery chain Supervalu and Select Comfort each lost about a fifth of market value during January, while Polaris’ market cap gave back a good portion of its 2013 gains when it dropped 16 percent ($1.7 billion) to start the new year.

The district mid-cap index for 2013 is constructed on monthly data running from January 2 to December 31. See technical notes for methodology and other details.

District Mid-Cap index -- 2-24-14

Student loan defaults widespread, and rising

First, the good news: According to the National Association of Colleges and Employers, U.S. firms expect to hire almost 8 percent more class of 2014 grads than they hired from the class of 2013.

The bad news: It can’t come fast enough for many attending college, because many are facing unsustainable debt and defaulting on their student loans.

Nationwide, the student loan default rate jumped this year to 14.7 percent (for those starting loan repayments in fiscal year 2010), a significant increase from 13.4 percent (for those starting repayment in 2009; for default rate background and methodology, see description at the end). Every district state saw its cumulative default rate also increase for the 2010 cohort group, though rates are typically much lower than the national average (see table, left). North Dakota’s rate of 5.6 percent for the 2010 cohort group is a small fraction of the national rate and has risen comparatively little over the past two years.

But other district states have witnessed large jumps in their default rates, and all but North Dakota are now above or approaching 10 percent, led by South Dakota’s 13 percent. Higher default rates are widespread among institutions; for the roughly 250 district schools with students in the 2010 repayment cohort, 182 saw their default rate rise; for 110 schools, it grew by 2 percentage points or more.

In most states, proprietary and two-year schools are bearing the brunt of higher default rates. In Minnesota, for example, default rates have gone up across the board, but the increase and overall rates at four-year public and private universities are a fraction of those seen among public two-year and private, proprietary schools (see chart, right).

Student loan defaults -- 2-20-14

Default rate description and methodology: Student loan defaults at the institutional level are tracked and released annually in the fall by the U.S. Department of Education. Data were gathered for 273 higher education institutions in Ninth District states, including all of Wisconsin. The agency uses a three-year default rate, which tracks those entering repayment (whether graduated or not) at any point during a federal fiscal year (Oct. 1 to Sept. 30) and defaulting by the end of the third fiscal year. Student loans are not in default until they are 270 days late. In essence, default rates measure those ex-students who have fallen more than nine months behind in loan repayments at some point within 24 to 36 months (depending on how close to the end of the fiscal year they started repaying loans). The agency also tracks two-year default rates, but will be phasing this measure out in favor of the three-year default rate.

Ninth District businesses remain optimistic

There has been a fair amount of attention given to the possibility of an economic slowdown in 2014. While only a small anecdote in the volume of economic data, a recent survey still suggests a positive outlook in 2014 for the Ninth District economy.

The Federal Reserve Bank of Minneapolis conducted an ad hoc survey of 135 Ninth District firms and asked them about their outlook for 2014 (see methodology). Over 80 percent expressed optimism for their community’s economy over the next 12 months. This is comparable to the 74 percent of respondents to the November 2013 fedgazette Business Outlook Poll. Results by sector show that construction respondents were the most positive with 9 out of 10 reporting optimism, followed by manufacturing (87 percent), professional services (80 percent) and finance, insurance and real estate (79 percent).

“Seeing improved trends,” said a Minnesota banker, reflecting the overall mood of respondents; 53 percent expect increased sales for their operations compared with only 9 percent that expect decreased sales. Part of the sales increase is due to higher productivity, which 65 percent said occurred at their firm over the past 12 months. Higher sales expectations are partially reflected in the 39 percent of businesses that expect to increase prices, while 8 percent expect to lower prices.

More companies also plan more capital investment—30 percent expect an increase over last year’s spending, while 12 percent predict a decrease. Companies are having a better time financing these capital expenditures through better access to bank credit; 19 percent reported improved access, while only 5 percent noted deteriorated access.

More companies are hiring, too, with 34 percent expecting more employment and only 9 percent expecting less. Firms are facing some challenges; 44 percent noted that securing workers was a challenge, and over half reported that complying with government regulation was a challenge. FIRE respondents, at 69 percent, reported the most concern about complying with regulations.

Ad hoc survey methodology: On Feb. 10, an email was sent to 1,000 business contacts from various sectors around the Ninth District. By 5 p.m. on Feb. 12, 135 responses were received, representing a 13.5 percent response rate. The largest number of respondents came from finance, insurance and real estate (44 percent), professional services (24 percent), manufacturing (14 percent) and construction (10 percent). The disproportionate number of FIRE responses could have some unknown influence on results.

Ninth District states grew faster than nation last year

When the Census Bureau released its 2013 population estimates this week, they showed that southern and western regions of the country grew at the fastest pace. But Ninth District states held their own.

North Dakota ranked first in the nation in state population growth. South Dakota (6th), Montana (15th) and Minnesota (22nd) also grew faster than the national average, and only Wisconsin (37th) grew slower than the nation (see table).

Some of the population growth occurred from natural increases—the number of births outweighed the number of deaths. Natural population increase was relatively consistent; all district states saw an increase of between 0.3 and 0.6 percent in its population by natural means. For Minnesota and Wisconsin, it was by far the largest growth factor.

The other factor in population change is migration; 37 percent of U.S. population growth occurred from international migration. International migration was a significant factor in the population increases for Minnesota and Wisconsin.

States can also gain (or lose) population by migration between states (see chart). Montana and the Dakotas gained considerable population from people moving into the state from other parts of the country. Almost 17,000 people migrated to North Dakota from other states, most of them headed for the many job opportunities in the Bakken oil fields. Net state migration was negative in Minnesota and especially Wisconsin. 

District population 2013 -- 1-24-14

District crop production suffered in 2013

It’s no secret that last year was a tough one for district farmers. As discussed in the Minneapolis Fed’s most recent Survey of Agricultural Credit Conditions, the weather last year was difficult, beginning with heavy rains that delayed or prevented planting in some areas and giving way to drought later in the summer.

Earlier reports from the USDA gave indications that the weather had taken a substantial toll. The agency recently released its annual crop production summary, and final numbers show that while the weather did have an impact, it wasn’t the same across Ninth District states.

Take corn, for example. While overall production fell slightly from a year earlier as expected in Minnesota and North Dakota, it increased in Wisconsin and especially in South Dakota, though the increase is due more to a drought-ravaged 2012 than stellar production in 2013 (see Chart 1).

Crop production CH 1-2 -- 1-17-14

That wasn’t the case for soybeans or wheat, however, both of which saw lower overall production in the district, although South Dakota also had a strong year in soybeans compared with 2012 (see Charts 2). While crop acreage shifted somewhat, output changes among district states (both higher and lower) were due mostly to changes in yields. For example, corn acres harvested increased slightly last year in North Dakota, but production declined because yields fell about 10 percent. Conversely, higher corn production in South Dakota and Wisconsin was due to higher yields. For soybeans, both acreage and yields were down.

Wheat is a different story altogether (see Chart 3). The drop in wheat output was due almost entirely to lower acreage, thanks in part to the lingering effects of the 2012 drought, which led to a dramatic decrease in winter wheat plantings (which occur in the fall of the year prior to harvest).

It was also a tougher year for crop prices. For example, the price farmers received for corn at the end of 2013 was 37 percent lower than a year earlier, according to the USDA. Lower prices and poorer yields have meant lower income for many farmers. USDA data on state farm income will not be released until next month, but 48 percent of respondents to the ag credit survey expected lower farm income in the fourth quarter of 2013, compared with 16 percent expecting an increase.

Crop production CH 3 -- 1-17-14

Businesses expect hiring to continue in 2014

There are renewed signs that the Ninth District economy continues to grow based on a recent poll of more than 100 business contacts from around the district (see methodology).

Businesses are expecting to expand; 41 percent plan to increase employment at their firms, and 58 percent of these firms cited expected high sales growth as the most important factor. Only 9 percent plan to decrease employment. In the same survey a year ago, 40 percent planned to increase employment and 7 percent planned to cut jobs (see chart).

Other important factors cited for new hiring were overworked staff, the need for additional skills, and improved financial condition of firms. The vast majority of respondents plan to use current employee referrals, word of mouth and advertising to get new employees. Twenty-two percent plan to use a recruiting firm, and only 8 percent plan to raise starting pay.

For those respondents not planning to hire additional people this year, most reported that finding skilled candidates is hampering hiring, or they wanted to keep operating costs low or expected sales growth to be low.

Ad hod survey chart -- 1-14-14

Methodology: On Jan. 13, the Minneapolis Fed invited, via email, about 500 Beige Book contacts from around the Ninth District to answer the special question in a web-based survey. By Jan. 14, 104 contacts had filled out the survey. The respondents come from a variety of industries (see table).

Ad hod survey table -- 1-14-14

 

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