State economic adviser says income growth is outpacing inflation, but concerns remain

A customer shops for food at a grocery store. (Justin Sullivan/Getty Images)

Personal incomes have outpaced rising prices in recent years despite widespread concerns about inflation, according to data shared Thursday during a Zoom meeting of the South Dakota Governor’s Council of Economic Advisors .

However, some council members worry that rising costs related to housing are undermining the income gains, while inflation and rising wages are affecting businesses.

State Economist Derek Johnson shared the latest S&P Global Market Intelligence data with the council, which illustrated the point: While the cost of U.S. goods from 2013 to 2023 rose by an annual average of 2.6%, personal incomes rose by an annual average of 4.7% during the same period. Projections for 2024 and 2025 show income increases continuing to outpace inflation.

South Dakota State University Professor of Economics Evert Van der Sluis is a member of the council. He said since 2019, U.S. consumer prices have increased by 22.6% while average hourly wages have risen by 25.3% (28% for those in non-supervisory roles). He said that difference is what matters most for workers and consumers.

“We hear a lot, especially in the popular press, about how all prices have gone up,” he said. “What often is kind of put to the wayside is how wages have gone up, too.”

Some on the council said Van der Sluis’ point needed additional context.

Council member Caleb Arceneaux, CEO of Liv Hospitality in Rapid City, said rising wages and inflation both eat into businesses’ bottom lines.

Council member John Hemmingstad of Elk Point, a director of Avalon Capital Group, said he’s curious how the inflation and income comparison would pan out after factoring in costs like property taxes and homeowners’ insurance, which have surged in recent years .

The latest S&P Global Market Intelligence forecasting for 2024 shows 0.4% growth in the total value of goods and services produced (GDP) for South Dakota. It shows a 2.6% projection for the nation.

Nonfarm incomes in South Dakota from 2013 to 2023 rose by an annual average of 5.2%, compared to a 2.6% rise in the cost of goods and services nationally. Projections for this year and next show nonfarm incomes continuing to rise faster than inflation.

Nonfarm incomes in the state are projected to have risen 5% by the end of 2024, and another 4.7% in 2025. Meanwhile, the cost of goods nationally is expected to jump 3% in 2024 and 2.2% in 2025.

EDITOR’S NOTE: This story has been updated to correct inaccurate numbers for the rates of change in inflation and personal incomes.

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