Economic Indicators: December 2020
In 1999, the Matrix revolutionized science fiction and action movies for two decades to come. Set in the future, the film depicts humanity’s day-to-day lives unknowingly trapped inside a simulated reality, the Matrix, created by intelligent and malevolent machines. Our December 2020 Economic Indicators for the Rapid City region feel a little like that.
On one hand, building permits, gross sales, and wages are as high as they’ve ever been. And unemployment has settled in at a regional rate of 3.7%, down from 4.2% last month and way down from a pandemic high of 13.8% in April 2020. At the same time, commercial vacancy rates are up 11% from where they were last year and leisure/hospitality employment continues to struggle to return to last year’s levels. Unfortunately, this is a national headwind that faces everyone, no matter the state, no matter the revenue picture. And, of course, there is the issue of housing, where housing stocks continue to fall and housing prices continue to rise. In November of 2020, the median list price of a home was $337,500. This is great news for the residential real estate community, but not as great for workers making $15/hour. We don’t see this subsiding for a while, as interest rates continue to be at all-time lows, which allows for an almost perpetual seller’s market and cycle of refinancing.
We are often asked how some segments of the economy (independent retail, restaurants) can be struggling, while city revenues continue to climb and unemployment falls. It’s the fair and right question to be asking. The short answer is that during a pandemic, people still shop, but their focus shifts from eating out and shopping out to eating in and shopping in. This means a lot more online sales, which are still taxed as local sales tax, but are not flowing into the pockets of main street businesses like they used to. This challenge continues as the pandemic rages on, which is one of the reasons we devoted our last Elevate magazine to shopping local and staying in town for the holidays and one of the reasons the Governor’s Office of Economic Development, along with Elevate Rapid City, continue to focus on grants and loans to main street and other small businesses.
This matrix of two economies may not subside until the 2nd quarter of 2021, with large-scale vaccinations on the horizon. In fact, those with access to the best economists in the world, the US Congress, are signaling the same with the recent passage of a new stimulus package this week. Let’s hope it helps provide a bridge to the other side.
President & CEO
Updated: December 22, 2020