Fausti, Scott

Opoku, Emmanuel

English

Research Papers in Economics

 
*Contact the authors at Emmanuel.Opoku@sdstate.edu or Scott.Fausti@sdstate.edu or 605-688-4141. 
 
            E C O N O M I C S 
   C O M M E N T A T O R 
South Dakota State University        No. 536                     December 15, 2011
 
 Economic Outlook  
Heading into 2012 
 
by 
    Emmanuel Opoku* 
    Research Associate 
      Scott W. Fausti* 
              Professor of Economics 
Introduction 
The recent release of the updated forecast for the 
economy by Federal Reserve policymakers indicates 
a lower forecast for economic growth. The change 
implies that the Federal Reserve expects growth to 
be sluggish and unemployment high through at least 
2013.  
Employment 
According to the Bureau of Labor Statistics (BLS), 
the return of 45,000 striking telecommunications 
workers in August partially contributed to the 
September employment gains. Payroll employment 
has risen by an average of 72,000 per month, 
compared with an average of 161,000 for the prior 
six months. The nonfarm payroll employment 
estimates indicate that 1,490,000 jobs were added 
from September 2010 to September 2011, an 
increase of 1.15%.  The September job gains 
represented sluggish job growth, which will require 
an increase in the rate of expansion in the private 
sector to lower unemployment. 
For the month of October, the largest over-the-month 
increase in employment occurred in Illinois 
(+30,000), followed by Texas (+25,700). The largest 
over-the-month declines in employment occurred in 
Wisconsin (-9,700), New York (-8,300), and 
Minnesota (-6,100)
1.  Professional and business  
 
services, health care, retail trade, leisure and 
hospitality added more jobs than other sectors, but 
government employment continued to decrease. 
Government employment declined by 20,000 in 
November 2011 compared to a decline of 138,000 
for November of last year.  
The December Non-Farm Payroll report released by 
the BLS estimated an increase of 120,000 nonfarm 
jobs in November as compared to a nonfarm 
employment job gain of 93,000 in November 2010
2 
(See Fig.1). 
 
  
Unemployment 
The BLS reported that the unemployment rate 
dropped by 0.4% to 8.6% in November after 
remaining at 9.1% for three consecutive months.   
This indicates a fall of 0.7% from the November  
2010 estimate of 9.3%. This reduces the total    
number of unemployed by 1.7 million, from   
 
14.3 million in November 2010 to 12.6 million in 
November 2011
3 (Fig.2).  Nevada recorded the 
highest unemployment rate (13.4%) whereas North 
Dakota recorded the lowest unemployment rate 
(3.5%), followed by Nebraska (4.2%) and South 
Dakota (4.6%).  
There are 2.6 million persons who were marginally 
attached to the labor force; about 1.1 million of these 
marginally attached were discouraged workers. 
Discouraged workers are persons not currently 
looking for work because they believe no jobs are 
available for them. According to the BLS, the 
remaining 1.5 million persons marginally attached to 
the labor force in November have not searched for 
work in the 4 weeks preceding the survey because 
they had family responsibilities or were enrolling in 
school. A measure of unemployment (U-6) that 
includes workers who are underemployed and those 
who are marginally attached to the labor force 
increased from 16.2% in September 2010 to 16.5% 
in September 2011. 
 
 
 
Industrial Production 
According to the Federal Reserve, industrial 
production was unchanged in August and increased 
0.2% in September
4. Industrial production increased 
at an annual rate of 5.1%. The percentage change in 
industrial production for the third quarter of 2011 
was 5.2% as compared to 0.6% in the second 
quarter.  
Manufacturing output moved up 0.4% in September 
and is 3.9% higher than in September 2010. 
Production at mines advanced 0.8% in September, 
while the output of utilities decreased 1.8%. Total 
industrial production for September was 3.2% above 
its year-earlier level. Capacity utilization for total 
industry increased to 77.4 %, a rate 1.7% above its 
level from a year earlier, but 3.0% below the average 
of 1972-2010. 
Economic Growth 
The Real Gross Domestic Product (GDP) is the 
broad measure of total output in the United States. 
Real GDP increased at an annual rate of 2.5% in the 
third quarter of 2011, an increase of 1.2% over the 
previous quarter 
5(Fig.3). The increase in real GDP 
reflected positive contributions from nonresidential 
fixed investment, exports, personal consumption 
expenditures and a small decrease in federal 
government spending that was partly offset by 
negative contributions from private inventory 
investment and state and local government 
spending. 
 
International Trade 
According to the Bureau of Economic Analysis, the 
U.S. balance of trade deficit declined $0.7 billion 
from $44.2 billion in September to $43.5 billion in 
October 2011 (Fig.4).  The level of exports in 
October was $179.2 billion and imports were $222.6 
billion
6. This indicates a decline in exports and 
imports by $1.5 billion and $2.2 billion in October 
2011, respectively.   
 
From October 2010 to October 2011, the goods and 
services deficit increased $4.0 billion. Exports were 
up $19.7 billion (12.3%), and imports were up $23.7 
billion (11.9%). The decline in exports and imports 
of goods and services from September to October 
2011 was mainly due to decreases in industrial 
supplies and materials; automotive vehicles, parts 
and engines; and foods, feeds and beverages. 
Increases in imports also occurred in other goods, 
capital goods, and consumer goods. A declining 
trade deficit, though minimal, has a positive effect 
on the level of U.S. economic activity. 
 
 
 
 
South Dakota Economy 
South Dakota (SD) recorded a decline in the 
unemployment rate in September 2011 to 4.6%, 
having remained at 4.7% for three consecutive 
months in June, July and August 2011
7. In August 
2011, SD nonfarm employment was estimated at 
403,800, whereas total nonfarm employment in 
September 2011 was 406,900 (preliminary estimate). 
This reflects a slight increase in SD employment. 
South Dakota gained 3,100 jobs (0.8%) between 
September 2010 and 2011. 
The Rapid City Metropolitan Statistical Area (MSA) 
recorded a decline of 0.3% in unemployment to 
4.2% between August and September 2011. Out of a 
total labor force of 66,201 workers in the Rapid City  
MSA, 63,391 were employed and 2,810 (not 
seasonally adjusted) were unemployed. 
The Sioux Falls MSA recorded a decline of 0.4% in 
unemployment to 4.2% between August and 
September 2011. Out of a total labor force of 
128,665 workers in Sioux Falls’ MSA, 123,441 were 
employed and 5,224 (not seasonally adjusted) were 
unemployed. 
South Dakota’s leading economic indicators point to 
slow growth through the fourth quarter of this year. 
A monthly survey conducted by Ernie Goss from 
Creighton University reported a decline in the South 
Dakota Business Conditions Index in November 
with respect to October 2011 (based on supply 
managers). The Index declined from 52.6 in October 
to 50.3 in November 2011
8. Components of the 
index were inventories (45.9), delivery time (47.5), 
production (49.0), new orders (52.6), and 
employment (56.5). However, according to Prof. 
Goss, manufacturers tied to international markets, 
agriculture, and energy continue to experience very 
positive growth.  Over the past year, the growth in 
manufacturing jobs has exceeded 4.0%, well above 
the national and the regional averages. Prof. Goss 
predicts a positive but slow growth for the next six 
months. 
 
Outlook for 2012 
The economic outlook for the U.S in 2012 is weak 
despite a decline in the unemployment level for the 
second time in eight months. The significant decline 
in the trade deficit in September, coupled with the 
positive percentage change in industrial production 
in the third quarter, indicates that the economy is 
improving at a slow pace. The fiscal and monetary 
policies initiated at the Federal level should continue 
to stimulate economic activity and mitigate some of 
the difficulties that Americans continue to face in 
this slowly improving economy. 
The Federal Reserve provides forecasts for the 
economy for the final quarters of the next three 
years. The unemployment forecast for the final 
quarters of 2011, 2012, 2013 and 2014 were 9.1%, 
8.7%, 8.2%, and 7.75%., respectively. The annual 
economic growth forecast for years 2011-2014 were   
 
 
 
S
O
U
T
H
 
D
A
K
O
T
A
 
S
T
A
T
E
 
U
N
I
V
E
R
S
I
T
Y
 
E
c
o
n
o
m
i
c
s
 
D
e
p
a
r
t
m
e
n
t
 
B
o
x
 
5
0
4
 
B
r
o
o
k
i
n
g
s
,
 
S
D
 
 
5
7
0
0
7
-
0
8
9
5
 
 
C
h
a
n
g
e
 
S
e
r
v
i
c
e
 
R
e
q
u
e
s
t
e
d
 
 
1.7%, 2.9%, 3.5%, and 3.9%, respectively. The 
annual rates of inflation forecast from 2011 to 2014 
were 2.9%, 2.0%, 2.0%, and 2.0%, respectively. 
These indicate that the projection in the economy 
doesn’t portray positive growth but rather sluggish 
growth. 
 ****************************************** 
ECONOMICS COMMENTATOR 
******************************************************** 
Department of Economics        
South Dakota State University        Phone: 605-688-4141 
Box 504   124 Scobey Hall              Fax:     605-688-6386 
Brookings, SD 57007-0895            E-Mail:Penny.Stover@ sdstate.edu 
75 copies of this newsletter were produced at a cost of less than $100            . 
 
                                                 
1 http://bls.gov/news.release/laus.nr0.htm 
2 http://bls.gov/news.release/empsit.b.htm  
3 http://bls.gov/news.release/empsit.t01.htm 
4 http://www.federalreserve.gov/releases/g17/current/  
5 http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm  
6 http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf  
7 http://bls.gov/eag/eag.sd.htm  
8 http://web.creighton.edu/business/centers-programs/economic-outlook/mid-american-states/south-dakota/2011 
 

Economic Outlook Heading in 2012

http://repec-sda.sdstate.edu/repec/sda/pdf/Commentator/No536.pdf

Economic Outlook Heading in 2012

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics