Carpe Diem

An update on ‘America’s economic miracle state’

fhfa

The EMSI blog has a post with lots of new economic data on America’s “economic miracle state” - North Dakota. Here are some highlights from the post “North Dakota’s Oil and Gas industry Just Keeps Growing“:

1. In 2012, North Dakota’s Gross Regional Product was $39.3 billion, an enormous figure for a state with only 690,000 residents and an increase of $6.4 billion from 2010.

2. For real per capita GDP in 2011, North Dakota ranked No. 7 in the country at $50,096.

3. Since the beginning of the state’s oil boom in 2005, North Dakota’s oil and gas industries have grown by an incredible 396.5%, compared to the nation’s otherwise impressive growth of 32.5%.

4. While North Dakota’s oil and gas industry is growing by leaps and bounds, it still only directly employs about 22,000 workers. North Dakota’s economy is booming because of the remarkable effect that energy production has on other industries. Since the beginning of the oil boom in 2005, the average growth across 4-digit-level NAICS industries with at least 500 jobs in the state is a whopping 20%. Many industries are expanding at astronomical speed, for example:

a. Jobs in “support industries for mining” have increased by almost eight times, from 2,307 in 2005 to 18,191 in 2012, at an average annual salary of more than $106,000.

b. Jobs in “architectural and engineering services” have more than doubled since 2005, and the average annual salary for North Dakota architects and engineers at $91,500 is above the national average of $89,500.

c. Trucking jobs in North Dakota have tripled in the last seven years, and drivers there earn almost $81,000 per year on average, which is a premium of almost 50% above the national average of $54,000 for truck drivers.

d. Employment for the ”Industrial and equipment rental” industry has increased almost six-fold since 2005, and the average annual pay of $106,000 in North Dakota is 36% above the national average for that industry of less than $78,000.

Overall, employees in the 24 fastest growing industries in North Dakota earn an average annual salary of more than $80,000, which is a wage premium of more than 29% above the national average salaries for those industries as a group.

5. EMSI research finds that job multipliers in North Dakota range from 1.76 for oil and gas pipeline construction to 5.37 for petroleum refineries. Therefore, for every direct job that energy production creates in the state adds an additional 1 to 4 jobs elsewhere in the North Dakota economy.

6. North Dakota’s labor force participation rate (LFPR) has held steady at between 71 to 74% since 2007. In contrast, the national LFPR has been falling since 2000, is currently at 63.5% and has never been higher than about 67%.

EMSI concludes that there is “no reason to expect North Dakota’s economy to slow down any time soon,” and that ”energy production seems poised to continue having a powerful effect on one of the United States’ most remarkable state economies.”

MP: My contribution to the discussion on “America’s economic miracle state” would be to point out that the shale revolution there helped to completely insulate the state’s housing market from the housing bubble and significant correction in home prices that affected most of the rest of America over the last five years. The chart above shows the dramatic difference in the quarterly FHFA house price index in North Dakota compared to the FHFA index for house prices nationally. WIth both FHFA house price indexes set equal to 100 in the fourth quarter of 2002, we can see graphically the dramatic difference in housing prices:

a) US house prices peaked in early 2007 and then dropped by 20% by 2011, and have recovered modestly in 2012. Nationally, house prices at the end of last year were still 16% below their 2007 peak.

b) Thanks in large part to the shale oil boom, neither the Great Recession nor the nationwide housing correction stopped North Dakota home prices from appreciating, and house prices there in Q4 2012 were 20% above prices in Q2 2007 –  the quarter when nationwide house prices peaked.

In other words, house prices nationally at the end of last year were 16% below their 2007 peak on average nationally, while house prices in ”Saudi Dakota,” thanks to shale oil and the energy revolution, were 20% above their level in 2007.  The shale revolution in North Dakota is not only creating thousands of “shovel-ready jobs” at salaries well above the national averages for most occupations, but it’s also generating benefits for homeowners throughout the state, by insulating them from the housing shocks that have adversely affected many parts of the country.

19 thoughts on “An update on ‘America’s economic miracle state’

  1. Silly me. When I saw America’s economic miracle state, I thought you were going to talk about California. Has anybody been to Williston? Or North Dakato for that matter? I was in Williston in the ’90′s; and, I’ve been in North Dakota a few times. Drove by Lawrence Welk’s birthplace in Strasburg. I know they’re doing well there right now; but, let’s not rush to move.

  2. I wonder if the oil industry is as important as federal outlays to North Dakota.

    The federal government spent more than $25,000 per capita in North Dakota. (FY2010–it might be more now).

    Net federal spending in North Dakota is more than $20,000—per capita!!!!

    Imagine, when a family of four sits down at the table in North Dakota, there is $80k in federal lard piled up on pink plates.

    See:

    http://www.udel.edu/johnmack/data_library/

    Really, should such an unpopulated area as North Dakota get two Senators (who inevitably are reduced to pulling down lard to North Dakota in exchange for votes) or should it be converted back to BLM rangeland?

    • Converted back to BLM? There is such a tiny amount of BLM land now or ever, what are you talking about. And we only get one Congressman due to our population, now you want to take away our Senator(s)? Are you from Minnesota?

    • The $ 20 grand you speak of is for the operation of two B52 Air Force bases and most of the ICBM in the U.S. arsenal. If you are so envious of the money, you can have it along with the missle silos and B52s in your back yard. You are welcome to them. Ignorance is bliss to some.

      • This federal money that goes to “North Dakota” mostly goes to the cost of isolated military bases in a sparsely populated state. The housing is usually on the base. The PX and commissary handle much of the personnel’s shopping — relatively little of this federal expenditure makes it into the ND economy. Contrary to the ignorant assertion of Benjamin Cole, $20,000 checks per person are not annually sent out to the ND populace.

        Contrast this with the Iowa crop and ethanol subsidies — well, that’s a different matter.

  3. Well congrats to North Dakota enjoy the boom while it last.Last time I checked oil is a finite resource,so while the black gold pours the people will come.But when the black gold stops pouring the tears will take over.California added more net payrolls in 2012 than Texas/Ohio,and W.Virginia combined,don’t believe the hype about Texas stealing jobs from CA.California for all its high taxes and supposed regulation deterrents has one advantage other states drool over,perfect weather,beautiful landscape,hot chicks.North Dakota has cold damp weather,and oil.

    • “California added more net payrolls in 2012 than Texas/Ohio,and W.Virginia combined”

      I would appreciate a link or reference information on were you found this data on California. Thanks

    • The fact that CA had a big NUMERICAL increase in net payrolls in 2012 ignores two factors:

      1. CA is BY FAR the most populous state in America. It has roughly 38 million people, considerably more than Texas, which has 26 million.
      http://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population

      2. CA’s one year slightly superior NUMERICAL job gain comes after a HUGE loss in jobs since 2007. Naturally the biggest rebound often occurs where the most damage was first suffered. Witness Las Vegas real estate prices.

      2. As late as 2005 CA unemployment was about the national average. Today CA has the 3rd highest state unemployment rate. (December, 2012) – 9.8%. National unemployment rate 7.8%. National unemployment rate not including CA is only 7.5%, making the CA unemployment rate 30.2% higher than the average of the other 49 states. http://www.bls.gov/web/laus/laumstrk.htm

      Using the more accurate U-6 measure of unemployment (includes involuntary part-time workers), CA is the 2nd worst at 19.6% vs. national 15.0%. National U-6 not including CA is 14.4%, making CA’s U-6 36.4% higher than the other 49 states. http://www.bls.gov/lau/stalt.htm

      And that increase in the “Golden State” unemployment rate comes IN ADDITION to the people fleeing CA for other states such as Texas, which has a 6.1% unemployment rate in spite of the influx of hundreds of thousands of economic refugees from other states.

  4. This is an extremely enlightening post. The multiplier effect extends far beyond job creation, even including higher property tax and transaction tax revenues to pay for government services.

  5. Yes, North Dakota is blessed with an abundance oil and gas to extract. But then, so is California, which as “Saudi Arabia” reserves!
    http://online.wsj.com/article/SB10001424127887323353204578128733463180210.html

    The difference is, one state encourages such extraction, the other state effectively prohibits it. California politicians CHOOSE high unemployment and low economic activity. It’s no accident of natural resource availability.

    It’s the environmentalists against everyone else, including the CA public and private labor unions. I suspect this state prohibition will change — to what degree is yet to be determined.

  6. Actually what is happening in North Dakota is typical of what happens in a resource boom, look at Beaumont Tx after spindletop, Oklahoma a bit later, the east texas field. Or on a smaller scale any number of towns in the west with gold and silver. Or indeed one could have written the same thing about Houghton and Handcock MI, about the turn of the 20th century from boom copper. (Calument was so overloaded with money they built a big opera house. Its population was 60k in 1900, today its at best 6k) Or take Virgina City, Austin or Eureka, NV or for a bit longer life Butte Mt or Ely Nevada.

    • Don’t forget Texas, that oil boom-bust state that today offers only squalor, mass unemployment, subsistence wages, misery and poverty.

      Remind me — how long ago did their oil boom start?

    • “Or take Virgina City, Austin or Eureka, NV or for a bit longer life Butte Mt or Ely Nevada.”

      Are you talking about Austin, Texas? The one with the December 2012, 5.1% unemployement rate? If so they are probably quite happy with this bust cyle that you mention.

  7. The economic success of North Dakota demonstrates the potential growth our nation can achieve by increasing the domestic production of oil and natural gas.

    North Dakota’s state population has increased to record high levels, the unemployment rate is the lowest in the nation and wages throughout the state are significantly higher than the national average.

    By modeling the comprehensive energy plan that North Dakota officials established over a decade ago, the United States can successfully recover from the recession.

    More info here: https://texog.com/blog/2012/10/04/tap-management-austin-tx-reviews-north-dakota-oil-gas-boom/

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