UNDATED – U.S. Bank’s midyear outlook warns that national growth will slow, borrowing costs will stay high, and consumer spending will remain subdued—but South Dakota’s economy remains resilient.
The analysis comes as economists debate whether the U.S. will undergo a recession or face a more severe economic slowdown. That makes South Dakota’s continued fiscal strength and low unemployment an outlier worth watching for policymakers seeking stability in an uncertain climate.
The June report from Eric Freedman, chief investment officer at U.S. Bank Wealth Management, notes that “Capital market movements thus far in 2025 reflect the wide range of outcomes commensurate with shifts in global trade, policy, and election outcomes.” He emphasizes the importance of diversification, stating that “correlations have turned markedly higher in recent time periods” between stocks and bonds.
State defies national trends
In contrast, South Dakota reports one of the lowest unemployment rates in the U.S., steadier agricultural commodity prices, and a strong fiscal position. The state closed Fiscal Year 2024 with an $80.7 million surplus, per the Bureau of Finance and Management.
Freedman notes that the current environment requires “a more global view, incorporating asset classes across stocks, bonds, and real assets”—an outlook that supports cautious optimism among South Dakota’s rural businesses.
The report also emphasizes that interest rates remain elevated, with the Federal Reserve holding steady in June. That matters for South Dakota farm lenders. Machinery loans and land purchases remain expensive, potentially favoring larger operations.
Still, delinquency rates in the Midwest remain low. U.S. Bank describes a “disciplined credit environment,” matching Federal Reserve data showing below-average debt stress in South Dakota.
South Dakota Searchlight reported in May that Joseph Santos, director of economics at South Dakota State University, told the state Banking Commission, “I think higher for longer,” when discussing Federal Reserve rates—an outlook that may continue to strain local borrowers.
Freedman advocates for portfolio diversification, writing that “narrowly focusing on stocks and bonds alone, especially the too rampant tendency of solely domestic stocks and bonds, is unlikely to help most investors prepare for the combination of risks and opportunities attendant in today’s market,” which could limit income for retirees and mutual fund investors. Santos’s perspective reinforces a prolonged tight credit market.
Despite national challenges, South Dakota’s conservative fiscal policy, low cost of living, and rural demographic profile boost its economic resilience. Northern Plains News will track ag lending trends and budget developments into the third quarter.
