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South Dakota e-Labor Bulletin

August 2022

South Dakota Industry Employment Trends to 2030

The Labor Market Information Center (LMIC) recently completed the 2020-2030 round of South Dakota industry employment projections. Employment levels were projected utilizing various statistical models incorporating historical employment data sets along with state and national economic trends.

As part of the nationally used projections methodology, a general assumption is made that no major catastrophic events, national disasters, or pandemics which would significantly affect economic activities of industries will occur during the projections period. The COVID-19 pandemic did affect employment levels of a few industry sectors in the base year, for which 2020 annual averages were used. Some industries had a large employment downturn for a short period in 2020 due to shutdowns. The succeeding employment increases in those sectors were the result of economic recovery rather than actual growth or new jobs.

An analysis of which industries are rising or recovering, and which ones are decreasing or slightly growing, provides helpful insights as to the overall health of an economy. Many industries had an unprecedented shutdown for the second quarter of 2020, therefore recording unusually low employment levels which have since returned to more normal levels. Overall, South Dakota showed a healthy and fairly rapid recovery from the pandemic, with growth projected over the next decade. Several factors contributed to the fast recovery and expected prosperity in the future, including consumer demand, population growth, the needs of an aging population and technological advances.

South Dakota’s growth rate is projected to slightly outpace the nation. The total number of workers in South Dakota is projected to increase by 41,121 or 8.5% (0.85% annually) from 2020 to 2030, reaching 525,014 by 2030. On the national level, according to the U.S. Bureau of Labor Statistics (BLS), the total employment level is expected to reach about 165.4 million (0.7% growth annually) over the 2020-2030 decade.

Nationally, the projected 0.7% annual growth in the next 10 years is less optimistic than the 0.8% growth rate experienced from 2010 to 2020. By 2030, all baby boomers will be at least 65 years old. The increasing share of people 65 and older contributes to a projected labor force growth rate slower than much of recent history. Likewise, the labor force participation rate is expected to continue declining, because older people (at traditional retirement ages) have lower participation rates compared with younger age groups.

The South Dakota projections include three categories of workers:

• Non-agricultural self-employed and unpaid family workers
• Agriculture and related workers (farm employment)
• Nonfarm wage and salaried workers

The nonfarm wage and salaried workers category consists of only those wage and salaried workers who are covered under the South Dakota Reemployment Assistance program (unemployment insurance) and those who work for non-profit organizations, such as private colleges and religious organizations. Nonfarm wage and salaried workers compose the major element (87.8%) of South Dakota’s labor force. This group is also projected to have the highest growth rate to 2030, at 8.9%.

Another important element of South Dakota’s labor force is agriculture and related workers (farm employment). This category is expected to grow slightly from 32,529 to 34,424 (5.8%) by 2030. In the past, according to the U.S. Bureau of Economic Analysis (BEA), farm employment in South Dakota decreased by 5,688 workers (15%) from 2000 to 2010. More recently, decreases in farm employment have tapered off, and the need for workers is increasing. Farm employment from 2010 to 2020 increased by 186 workers (0.6%). Nationally, employment in agriculture, forestry, fishing and hunting is expected to increase slightly, by 55,000 jobs (2.5%) through 2030. Nationally, the sluggish growth can be attributed to expected employment declines in the animal production and forestry subsectors.

The final component of the labor force in South Dakota is the non-agricultural self-employed and unpaid family workers category. According to BLS (Current Population Survey and American Time Use Survey), self-employed persons are individuals who work for profit or fees in their own business, profession, trade or farm. This smallest portion (5.5%) of South Dakota’s labor force is expected to have a growth rate of 5.9% (0.59% annually) in the coming decade. On a national level, this category is expected to have annual growth of 0.8%.

Industries are categorized at several different levels of detail using the North American Industry Classification System (NAICS) coding structure. Each digit level represents a greater level of detail in how business activities are categorized. NAICS categorizes businesses into one of 20 sectors at a two-digit code level. For example, the two-digit code 72 represents the Accommodation and Food Services sector. Businesses are then classified into more specific categories within a sector, represented by codes of up to six digits. The more digits a code has, the more specific the business activity.

At the very broadest level, industry supersectors are categorized into one of two groups: as being either goods-producing or service-providing. The goods-producing category includes the following supersectors: Natural Resources and Mining, Construction and Manufacturing. The service-providing category is comprised of Trade, Transportation, and Utilities; Information; Financial Activities; Professional and Business Services; Education and Health Services; Leisure and Hospitality; Other Services; and Public Administration.

In 2020, the service-providing industries accounted for73.7% of total employment in South Dakota. The service-providing industries are anticipated to employ 31,645 workers by 2030, or 8.9% increase in employment. Meanwhile, the goods-producing industries are expected to increase 7,921 workers (7.8%). On the national level, BLS is expecting an increase of 11.3 million in service-producing industries, reaching over 134.1 million jobs by 2030.

Looking at national trends projected at the two-digit NAICS level, we learn the Leisure and Hospitality sector is projected to increase employment the fastest, driven largely by economic recovery from the pandemic. Healthcare and Social Assistance, Mining, and Educational Services are also projected to grow faster than average nationally.

In South Dakota, the fastest growing two-digit sectors are projected to be:

• Professional and Technical Services (18.5%)
• Arts, Entertainment and Recreation (17.8%)
• Accommodation and Food Services (16.4%)
• Administrative and Waste Services (12.9%)
• Management of Companies and Enterprises (11.8%).

These fastest growing sectors in South Dakota also contain four of the top 10 industries at the more detailed, three-digit NAICS level projected to grow the fastest to 2030.

Let’s look at Construction for an example of how a two-digit NAICS industry sector is broken down into more detailed three- and four-digit industry levels. The two-digit Construction supersector NAICS 23 is broken down into more detailed three-digit subsectors:

• Construction of Buildings (NAICS 236)
• Heavy and Civil Engineering Construction (NAICS 237)
• Specialty Trade Contractors (NAICS 238).

Using Construction of Buildings (NAICS 236) from above, we’ll illustrate the further break-down of businesses at the four-digit NAICS level:

• Residential Building Construction (NAICS 2361)
• Nonresidential Building Construction (NAICS 2362).

We ranked South Dakota’s industries at the three-digit NAICS level to see which are projected to grow the most from 2020 to 2030. The next section of this article will focus on those 10 industries for which the greatest growth (absolute change) is projected to 2030. Only those industry subsectors with a minimum of 500 workers in 2020 were included.

Food Services and Drinking Places

The Food Services and Drinking Places subsector is projected to add the most workers (4,069) in South Dakota to 2030 (14.7% growth). Businesses in this subsector prepare meals, snacks and beverages to customer order for immediate on-premises or off-premises consumption. There is a wide range of establishment types in this subsector. This subsector’s employment projection is reflecting more recovery from the pandemic than actual growth. The base year (2020) data reflects lower employment levels due to the shutdowns which occurred in the second quarter of 2020 when the COVID-19 pandemic’s effects hit South Dakota the hardest. The pandemic hit the food service industry harder than most due to the fact it relies on human-to-human interactions, which came nearly to a stop for a period in South Dakota. This is also reflected in the national data.

Hospitals

The Hospitals subsector is projected to increase by 3,958 workers (14.0%) over the next 10 years in South Dakota. This subsector is comprised of establishments providing medical, diagnostic and treatment services and other specialized accommodations by inpatients. Hospitals may also provide outpatient services as a secondary activity. Several factors are contributing to a continued uptrend in Hospitals. The population in South Dakota continues to age, which drives the demand for healthcare services. According to five-year estimates from the U.S Census Bureau*, South Dakota’s population 65 and older increased 16.9% from 2015 to 2020. A rise in the number of citizens with chronic illnesses will also contribute to an increased demand for workers in this industry.

Professional, Scientific and Technical Services

South Dakota’s Professional, Scientific and Technical Services subsector is projected to add 2,755 workers (18.5%) over the next decade. This subsector is comprised of establishments making available the knowledge and skills of their employees, often on an assignment basis, where an individual or team is responsible for the delivery of services to the client. The individual industries of this subsector are defined by the particular expertise and training of the service provider. Technological advancements continue to help businesses gain a competitive edge and reduce costs through automation, therefore driving demand in this subsector. The demand for consultants and experts in this subsector with unique, highly advanced knowledge and skill sets will remain high. As just one example, large retail stores are replacing cashiers with automation, many contracting with companies in this subsector for the technical expertise needed to navigate the transition.

Ambulatory Health Care Services

The number of workers in South Dakota’s Ambulatory Health Care Services subsector is projected to increase by 2,577 workers (14.4%) over the next 10 years. This subsector is comprised of entities providing health care services directly or indirectly to ambulatory patients. Inpatient services are not usually included. Five of the seven more detailed, four-digit industries in this sector are expected to have double digit employment gains over the next 10 years.

The demands of an aging population will continue to raise the number of workers needed. According to the U.S Census Bureau*, South Dakota had 125,613 people who were 65 or older in 2015, compared to 146,831 in the age group by 2020. With an aging population typically comes an increase in chronic illness and other age-related problems such as diabetes, cardiovascular disease and dementia. According to the American Heart Association, as many as half of all people over 65 in the United States have prediabetes, and many people with type 1 and type 2 diabetes are unaware of their condition.

Educational Services

The Educational Services subsector is projected to add 2,069 workers (5.5%) in South Dakota to 2030. Industries in this subsector provide instruction and training in a wide variety of subjects. Included are schools, colleges, universities and training centers. Employment in Educational Services has remained relatively steady; however, there was an anomaly in the second quarter 2020 data due to the COVID-19 shutdowns. Comparing the last three years of annual data for this industry from the Quarterly Census of Employment and Wages program shows about 36,180 workers in 2019, 34,600 workers in 2020, and 35,460 workers in 2021. The pandemic forced schools to provide education virtually with about the same level of educator employment; however, workers providing support activities such as food service, transportation and extracurricular activities associated with in-session school were temporarily dropped from payrolls in many cases.

Accommodation, including Hotels and Motels

In South Dakota, the number of workers employed in the Accommodation, including Hotels and Motels subsector is projected to increase by 1,646 workers (23.2%) from 2020 to 2030. Businesses in this subsector provide lodging or short-term accommodations for travelers, vacationers and others. Some provide lodging only, while others also provide meals, laundry services and recreational facilities.

The projections for this subsector are essentially showing continued recovery rather than true growth. Like many service-related industries, the shutdowns caused by the pandemic negatively impacted the number of workers temporarily in South Dakota during 2020. Hotels not only in South Dakota but nationwide faced hard times after the pandemic struck in 2020, with travel nearly grinding to a halt to curb the spread of COVID-19. In South Dakota, the shutdowns were more isolated to the second quarter of the year. By 2021, this subsector was getting back to normal in South Dakota and thrived as travel resumed.

According to the South Dakota Department of Tourism’s 2020 Annual Report, the 2020 visitor and visitor spending results were significantly impacted by the pandemic. Both the limitations and restrictions to mobility and economic disruption of the pandemic hit travel-reliant businesses hard. But they strongly rebounded in 2021. According to the 2021 Tourism annual report, key metrics like room revenues hit peaks in the summer months, registering 30% higher than what had ever been reported in the state previously. Sales tax collections in tourism-influenced industries like restaurants and gasoline stations affirmed the explosion of visitor activity the state saw in 2021.

Administrative and Support Services

The number of workers employed in South Dakota’s Administrative and Support Services subsector is projected to increase by 1,541 workers (13%) to 2030. Businesses included in this subsector are engaged in activities supporting the day-to-day operations of other organizations. The processes provided by this sector are often integral parts of the activities of establishments found in all sectors of the economy. At the four-digit level, Office Administrative Services, Facilities Support Services, Employment Services, and Services to Buildings and Dwellings all are expected to have double digit growth over the next 10 years. As the economy recovers to previous levels and workers are welcomed back to their offices, the demand for administrative and support services will continue to increase. Businesses which shut down and reopened have a greater awareness of cleanliness and a greater need to employ support staff to take on the additional responsibilities. In many cases, those businesses contract with establishments in this subsector for those services.

Specialty Trade Contractors

The Specialty Trade Contractors subsector is projected to add 1,250 workers (8.9%) in South Dakota over the next decade. Businesses in this subsector perform specific activities (such as site preparation, concrete pouring, plumbing, painting and electrical work) involved in building construction or other similar activities for all types of construction but are not responsible for an entire construction project. The work performed by specialty trade contractors is usually subcontracted from a general contractor type or for-sale builder. But specialty trade contractors may also work directly for the owner of the property; this is especially true in the case of repair work and minor remodeling projects.

The demand for home improvements has risen substantially the past few years, in part due to the transition for many to working from home. The pandemic intensified this trend, often out of necessity. Housed under this subsector are Building Foundation and Exterior Contractors, Building Equipment Contractors, Building Finishing Contractors, and Other Specialty Trade Contractors. According to the City of Sioux Falls as referenced in their 2021 annual report, although impacting overall spending in the prior year, COVID-19 did not dampen building activity and investment within the city. Building upon 2020’s momentum, 2021 was another record-setting year, with the valuation of building permits eclipsing the 1 billion mark (1.1 billion) for the first time in the city’s history.

Food Manufacturing

The Food Manufacturing subsector is projected to add 1,212 workers (11.2%) over the next 10 years in South Dakota. This subsector consists of entities which transform livestock and agricultural products into products for intermediate or final consumption. The industry groups are distinguished by the raw materials (generally of animal or vegetable origin) processed into food products. Entities included in this subsector transform livestock and agricultural products into products for intermediate or final consumption. The industry groups are distinguished by the raw materials (generally of animal or vegetable origin) processed into food products. The driving force behind this subsector is consumer demand. South Dakota’s population has been increasing, and the “open for business” mentality during and following the pandemic attracted many to South Dakota for a lower cost of living and policies geared toward fiscal responsibility. According to five-year estimates from the U.S Census Bureau*, South Dakota’s population was 843,190 in 2015; by 2020, it grew to 879,336, reflecting growth of 4.3% or 36,146 residents. Within this subsector, Other Food Manufacturing, Animal Slaughtering and Processing, Dairy Product Manufacturing, and Animal Food Manufacturing are expected to have respectable growth, driving the subsector’s overall growth.

Local Government, Excluding Education and Hospitals

The number of workers employed in South Dakota’s Local Government, Excluding Education and Hospitals subsector is projected to increase by 1,197 (5.5%) from 2020 to 2030. The subsector does not include local government employees who work in education or hospitals; those employees are instead included in their respective industry classifications. Local government is the public management of districts, counties or cities. These government entities work together to satisfy the needs of administration for their geographic area. Local government includes numerous and various lines of work, but worker levels are driven by population, funding and public service needs. When there is an expected rise in population, there is a correlated increase in the demand for public services.

Several factors can contribute to the declining or slow growth of an industry not only in South Dakota but also nationally. Nationally the largest declines are expected to be in the Utilities, Retail and the Federal Government sectors over the next decade. In South Dakota the only sector expected to decline overall is the Information sector. Three of the eight three-digit NAICS industries expected to decline are in the Information sector. Since many South Dakota industries are considered small, even a small employment loss over the projections period can substantially impact a subsector. Consumer demand, consumer preferences, the rise of electronic content and other technology changes have all impacted the industries projected to decline.

Publishing Industries (except Internet)

The Publishing Industries (except Internet) subsector is projected to decrease by 171 workers (17.7%) through 2030 in South Dakota. Establishments in this sector publish newspapers, magazines, periodicals, books, directories, mailing lists and software. Publishing Industries (except Internet) is extremely reliant on consumer preference. Consumers over the past decade have accepted technology, and most prefer the ease of viewing content online rather than in print form. According to the U.S. Census Bureau, 90.2% of households in South Dakota have a computer, and 83.2% have a broadband internet subscription. Another important factor is the availability of news, sports and other content consumers are enjoying with smartphones. For the first time in 2016, the U.S. Census Bureau measured ownership or use of smart-phones and tablets separately from more traditional desktop or laptop computers. They found nationally, 76% of households had a smartphone, and 58% had a tablet. Desktop or laptop computers still led the way, at 77% of households.

Electronics and Appliance Stores

In South Dakota, the Electronics and Appliance Stores subsector is projected to decline 95 workers (7.5%) by 2030. Industries in the Electronics and Appliance Stores subsector sell new electronics and appliances from point-of sale locations. Establishments in this subsector often operate from locations with special provisions for floor displays, requiring special electrical capacity to accommodate the proper demonstration of the products. The use and availability of items for purchase on the internet has had a negative effect on consumer demand in this subsector. According to the U.S. Census Bureau, from 1998 to 2018, total U.S. retail trade sales grew from $2,581.8 billion to $5,269.5 billion, and the share of e-commerce soared from $5.0 billion to $519.6 billion. Retail sales are increasing, but the bulk of growth is in e-commerce.

Printing and Related Support Activities

The number of workers employed in the Printing and Related Support Activities subsector in South Dakota is expected to decrease by 75 (6.0%). This subsector includes establishments which print products such as newspapers, books, labels, business cards, stationery, business forms and other materials, and perform support activities like data imaging, plate-making and bookbinding. The Printing and Related Support Activities subsector has a direct relationship with and depends on the Publishing Industries (except Internet) subsector. As consumer preferences continue to shift toward online resources, this subsector’s decline is expected to continue. The rise of the internet has allowed people to easily access news, pay bills read for pleasure without any print involved.

Miscellaneous Store Retailers

South Dakota’s Miscellaneous Store Retailers subsector is projected to decrease by 57 workers (2.4%) over the next 10 years. This retail trade subsector is a catch-all for retailers who sell specific products not otherwise categorized in another retail code. Included here are florists, used merchandise stores, and pet and pet supply stores. These normally smaller unique retailers have struggled to compete with larger retail stores offering the same or similar goods at lower prices due to less overhead.

As inflation rises, consumers become increasingly conscious of prices, saving money when and where they can by shopping at larger chain or discount stores. The Consumer Price Index (CPI) for All Urban Consumers in the Midwest Urban Region had been increasing every month since December 2020 until July 2022. The July 2022 number of 276.525 was a 0.2% decrease over June. Prior to this newest minor decrease, the CPI rose 15.0% from July 2020 to July 2022.

Motion Picture and Sound Recording Industries

The number of South Dakotans employed in the Motion Picture and Sound Recording Industries is projected to decline 17 workers (4.2%) over the next 10 years. Entities in this subsector produce and distribute motion pictures and sound recordings. While producers and distributors of motion pictures and sound recordings issue works for sale as traditional publishers do, the processes are sufficiently different to warrant placing establishments engaged in these activities in a separate subsector. At the four-digit NAICS level there are two small categories: Motion Picture and Video Industries, and Sound Recording Industries. The industries are very small, so even a projected loss of a couple workers can have a dramatic effect on the percent change. For example, when a movie is filmed in South Dakota, this industry shows a dramatic rise in employment levels; once the movie is concluded, there is a dramatic drop in employment. In 2020, this subsector took a hit due to shutdowns in the filming industry. The decline is expected to continue over the next decade.

Broadcasting (except Internet)

Worker levels in the Broadcasting (except Internet) subsector are projected to decrease slightly, by 14 workers (1.6%) in South Dakota over the projections period. This subsector includes establishments which create content or acquire the right to distribute content and subsequently broadcast the content, in South Dakota largely radio and television broadcasting companies and those providing cable television service on a subscription basis. Consolidation of radio and TV stations and implementation of technology have decreased the number of workers needed to continue operations in this industry. Increased consumer subscriptions to internet- and satellite-based streaming services for news and entertainment purposes have impacted this subsector as well.

Nonstore Retailers

South Dakota’s Nonstore Retailers subsector is projected to decrease slightly by seven workers (0.6%) over the next decade. Establishments included in this subsector retail merchandise using methods such as broadcasting infomercials and publishing direct-response advertising, publishing paper and electronic catalogs, doing door-to-door solicitation, providing in-home demonstrations, selling from portable stalls and distributing through vending machines. Consumer preferences in the last decade trended away from these types of sales. The convenience and product variety available with shopping online has had an adverse impact on employment levels among nonstore retailers.

Paper Manufacturing

Worker levels in the Paper Manufacturing subsector are projected to decrease by two workers (0.3%) in the state. This subsector includes manufacturers of pulp, paper or converted paper products. The manufacturing of pulp involves separating the cellulose fibers from other impurities in wood or used paper. The manufacturing of paper involves matting these fibers into a sheet. Converted paper products are made from paper and other materials by various cutting and shaping techniques. Several factors can be pointed to for the relative slow decrease, but the main factors are consumer demand and technology. The availability of information on the internet has had a negative impact on the paper manufacturing industry. There is simply less demand for information in print form. Technology and increased automation in these manufacturing processes has also lowered the demand for workers.

*Population data referenced above is from the U.S. Census Bureau’s American Community Survey. Data are from the five-year estimates, using the 2011-2015 estimates for 2015, and the 2016-2020 estimates for the 2020 data.