MUST READ: North Dakota's Economic “Miracle”—It's Not Oil

[Dokkie]

In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:

Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.

According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July—that’s just over a third of the national rate (9.1 percent), and about a quarter of the rate of the state with the highest joblessness (Nevada, at 12.9 percent).

North Dakota has had the lowest unemployment in the country (or was tied for the lowest unemployment rate in the country) every single month since July 2008.

Its healthy job market is also reflected in its payroll growth numbers. . . . ear over year, its payrolls grew by 5.2 percent. Texas came in second, with an increase of 2.6 percent.

snip


Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7 percent


http://www.yesmagazine.org/new-economy/the-north-dakota-miracle-not-all-about-oil

[burf]

1. How about the

fact that North Dakota gets roughly two dollars back for every dollar they send to Washington?

[Dokkie]

2. I cannot verify that fact

But lets say its actually getting 2x more money than it sends in taxes, why is it doing so much better than other states that get the same ration of taxes to federal subsidies? And why are we giving so much(any) money to states that are running budget surplus?

[burf]

4. ND has been on the recieving end of fed

funds for as long as I can remember. When Earl Pomeroy was their congressman, his campaign commercials used to state how he would bring in the bucks.

http://news.heartland.org/newspaper-article/2008/01/01/some-states-get-fat-others-fleeced

The data is from 2005, but the pigs still keep lining up at the trough.

[saras]

3. Too bad it's not because of some simple thing other states can imitate.

There's LOTS of reasons, not ALL of them good.

One - North Dakota is hell for the severely unemployed - you simply CANNOT live there without money, housing, etc. The climate won't allow it. VERY different than either coast, except perhaps New England. So if you don't find work, you leave or die. Even in the Depression, hobos had the sense to not get trapped up north except during harvest season.

Two - their response to the weather: "The state's weather makes it hard to lure new residents. The average January low temperature is four degrees below zero. North Dakota holds job fairs in other states to match workers to available jobs.

Three - "North Dakota is one of the few states to add manufacturing jobs over the decade. Bobcat, maker of farm and construction equipment, is headquartered in the state. We don't have big factories like Gary, Ind., or steel mills that are hard to retool," Flynn says. "We have smaller plants that are some of the most efficient in the world."

Four - "Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements... North Dakota’s money and banking reserves are being kept within the state and invested there... In contrast, California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury."

And the fact that the Right is running with the idea that http://www.politifact.com/truth-o-meter/statements/2010/oct/29/crossroads-gps/crossroads-gps-says-north-dakotas-economy-reeling-/">North Dakota's economy is in shambles indicates it probably really is doing as well as it appears.

Their magic trick appears to not be a magic trick at all, unless you count "don't do anything both large-scale and incredibly stupid" as a magic trick. It remains to be seen how much fracking will cost them, but they're so lightly populated that they could destroy a hell of a lot of water before it was seriously noticed. Fracking might just turn out to qualify as "both large-scale and incredibly stupid".

[eridani]

7. The article compares ND to other states relying on resource extraction

Alaska, Wyoming and Montana are just as cold, and therefore as hard on the unemployed.

[kickysnana]

5. The unemployed and needy migrate, a lot of them n/t

[malakai2]

6. awful analysis

Far too simplistic analysis of the energy booms in the various states and how those booms are contributing to or driving local economies. The progression of the boom here is not at all like Alaska's aging, developed oil fields or Wyoming's gas fields or Montana's coal fields. Comparing a single large, developed field in Montana (over half of Montana's production, by the way) to the more numerous smaller and still immature fields in North Dakota looks pretty lazy to me as well. Oil volume extracted tells you nothing about how much labor was required for extraction and how much labor is currently employed in the area. It also doesn't tell you anything about the economic conditions preceding the current Bakken/Tyler/Sanish/Three Forks boom, how much of a multiplier can be assigned for each drill rig, anything of use really in comparing North Dakota's boom to what is happening in other states. A better analysis of how oil development has impacted the North Dakota economy would change the conclusion at the link.

Prior to the current boom beginning in late 2005 or early 2006, North Dakota had a shrinking, aging population and an economy based on agriculture and tourism. Agricultural production, while not poor, wasn't making anyone rich. I can also assure you that tourist receipts here =/= tourist receipts in states where there is much to see, such as pretty much every other state in the nation. The state bank may have been a driver in slowing the decline, but it was not turning things around. Absent the oil boom, there were few other job options for new people entering the workplace. Costs associated with farm startup for those who don't already own productive acreage prohibit entry, even for those with access to the bank. Tourism, the other "big" driver here, was not making anyone rich and without oil workers and their families visiting Medora or dropping cash during hunting season might have declined through the recession - there just isn't much else up here to draw people from outside the region.

What's left? A job at one of the power plants north of Bismarck, a job at Bobcat while they're laying off workers, a government job, a job in the legal or medical field in the small and saturated Bismarck/Grand Forks/Fargo markets, or a McJob. Odds are still not great breaking into most of those, though if you're willing to live in your car in Williston or Dickinson you can make $20.00/hr working at McDonalds or Subway in the oil patch. That's what those places have to pay up here to be competetive. Most people with any skill will instead go get a six figure job as a trucker in the oil patch, or as a field guy (who might reach six figures with bonus money), or as an engineer or executive making well into six figures. Or they'll open a business cleaning up spills, that's a lucrative deal right now with no shortage of clientele for anyone interested in moving here. If you are a decent handyman you could open a business fixing just about anything, I know several who have a backlog stretching weeks because there is so much business. None of this is driven by the bank, and I'm not even touching the royalty checks mineral rights owners get or the money that needs to be spent on regulators up here.

I don't see how a person can ignore the trends in oilfield worker numbers, company investments, and production figures and simply say 400,000 barrels per day is less than what Alaska produces, therefore oil must not be the driver here. Far too simplistic and simply wrong. None of this is to say that the oil industry in North Dakota has been a net positive - I don't believe it has been but it will take years for the social and environmental costs to become fully apparent - but it's tough to start understanding those effects (as well as the "resource extraction = jobs equation we're likely to see during the election cycle) if people aren't seeing the oil boom here as the state's economic driver.

[txlibdem]

8. You forgot to include all the income from military bases and operations in N. Dakota

:hi: