Recent Performance. North Dakota has
fallen into recession, but the extent of the
downturn is remarkably mild. A boom in
energy production, exploration and development
in the region surrounding Bismarck in
previous years is helping limit the severity
of the downturn. A strong financial services
industry and stable household balance sheets
are also helping to shield the state from more
severe job losses. Construction is recovering
from its recent lull, and the state’s strong fiscal
position is supporting hiring in the public
sector. Moreover, private service industries
remain on an even keel, supported by strong
income gains in recent years. ND’s unemployment
rate is 5 percentage points below the
national average.
Labor market. ND’s labor market has undergone
minimal erosion thus far, but additional
slack will develop in the near term as manufacturing
unwinds. The unemployment rate
has climbed a little more than 1 percentage
point since December, with reduced demand
for the state’s manufactured goods placing
related workers on the dole. Both initial and
continuing claims for unemployment insurance
rose considerably in the first quarter.
On balance, ND’s labor market will remain
in much better shape than nationally as the
state boasts the lowest jobless rate in the nation.
Forward-looking measures of the labor
market signal the worst of the downturn may
be over, as initial unemployment claims have
begun to retract. Although layoffs will moderate,
the unemployment rate is expected to
increase further in the near term, cresting at
5.5% in the second quarter of 2010, well below
the 10% seen nationwide.
Trade. The decline in foreign demand for
the state’s manufactured wares will weigh
on trade-related industries over the next several
months. Canada, the destination of over
50% of the state’s exports, is mired in recession.
The depreciation of the Canadian dollar
against the U.S. dollar is also hurting demand
for ND’s manufactured goods and services.
Demand for various state products, especially
farm machinery, has largely dissipated;
industrial production has fallen to its lowest
level since the late 1990s. Reduced demand
for manufactured goods will cause transportation
and warehousing to retract some of
the substantial gains made over the past few
years. Recovery in manufacturing and transportation
is not expected to materialize until
global demand strengthens in 2010.
Oil outlook. Weakened demand for oil distillates
in the near term will curb the feverish
pace of oil-related activity seen over the
past two years. The price of oil has fallen
measurably from its summer 2008 peak,
causing a commensurate decline in rig
counts. The price of oil is expected to average
below $70 per barrel for the duration of
this year and average $75 per barrel in 2010.
Low prices will make it difficult for producers
to justify adding more rigs, sidelining a
rebound in energy-related industries until a
sustained global recovery lifts the price of
oil. This is not expected to occur until the
latter half of 2010.
The North Dakota economy will contract
in the near term, as lower commodity
prices weigh on income growth and
reduced business investment globally induces
layoffs in manufacturing and other
export-related industries. Longer term,
low business costs will lessen the outflow
of manufacturing jobs, but the industry
will contribute little to income growth,
leading to reduced spending on local services.
Therefore, as the nation begins its
recovery, ND will fall into a slower, more
sustainable pace of expansion. Growth in
ND will lag the national average over the
extended forecast horizon.
Glenn Wingard
June 2009
STRENGTHS
Location makes it a major U.S.-Canada trade
corridor.
Major producer of several important
agricultural commodities.
Strong capacity for fuel production.
WEAKNESSES
Large, slow-growing rural population.
Lacks strong economic growth drivers, outside
of energy and agriculture.
UPSIDE
New trade pacts bolster export growth.
Signifi cant new oil production from the Bakken
formation.
DOWNSIDE
Tight labor markets hinder economic growth.
Energy prices fall more than expected,
adversely impacting energy-related
investment.
14
3
2nd quintile
1st quintile
0.39%
86%
Aa2 U.S. ND
95
100
105
110
115
120
125
130
135
140
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Forecast
-10 -8 -6 -4 -2 0 2 4 6 8
Government
Other Services
Leisure & Hospitality
Edu & Health Svcs
Prof & Business Svcs
Financial Activities
Information
Trans/Utilities
Trade
Manufacturing
Construction
Total
% change year ago, 3 mo. MA
4.0
-1.3
1.3
1.4
-2.0
0.7
-2.7
5.6
0.2
-6.5
-1.0
1.0
2002 2003 2004 2005 2006 2007 2008 Indicators 2009 2010 2011 2012 2013
18.8 19.9 20.0 20.9 21.1 22.6 24.3 Gross state product (C$B) 24.6 25.1 26.1 27.4 28.4
330 333 338 345 352 358 367 Total employment (000) 365 364 371 380 389
-0.1 0.8 1.6 2.0 2.2 1.7 2.4 % change -0.6 -0.1 1.8 2.5 2.3
3.5 3.6 3.5 3.4 3.2 3.1 3.2 Unemployment rate 5.0 5.5 4.7 3.4 2.6
1.7 8.6 2.6 7.6 2.3 12.2 9.6 Personal income growth 0.5 3.4 4.1 4.5 5.0
634 633 636 635 636 638 641 Population (000) 645 647 650 653 657
-3.9 -2.0 1.9 -3.0 -1.4 -1.9 0.1 Net migration (000) -0.4 -1.1 -1.1 0.1 -0.4
1,793 2,344 2,521 2,367 2,297 2,194 1,888 Single-family permits 461 1,060 1,746 2,303 2,432
1,472 1,377 1,512 1,671 1,232 1,166 945 Multifamily permits 1,216 1,410 1,425 1,739 2,038
180.5 190.0 203.8 220.5 236.0 249.9 259.6 House price index (1980Q1 = 100) 263.3 259.7 262.6 270.8 279.2
1,954 3,296 1,949 2,041 1,974 2,311 1,741 Mortgage originations ($M) 1,958 1,768 1,718 1,817 1,912
27.9 26.9 28.3 25.8 25.1 26.8 25.7 New vehicle registrations (000) 17.6 19.9 23.6 27.0 28.3
1,958 2,188 2,203 3,444 711 1,147 1,307 Personal bankruptcies 1,693 2,273 2,279 2,042 1,960
EMPLOYMENT MIGRATION FLOWS
HOUSE PRICES MERCHANDISE TRADE
EMPLOYMENT AND INDUSTRY STRUCTURE
INCOME TAX DISTRIBUTION
INCOME
INDUSTRIAL
DIVERSITY
EMPLOYMENT
VOLATILITY DUE TO
U.S. FLUCTUATIONS
EMPLOYMENT
VOLATILITY
TOP EMPLOYERS INDUSTRY EMPLOYMENT
Sector U.S.
Construction
Manufacturing
Durable
Nondurable
Transport/Utilities
Wholesale Trade
Retail Trade
Information
Financial Activities
Prof. & Business Services
Education & Health Services
Leisure & Hosp. Services
Other Services
Government
Percent of total employment, 2008
LOCATION QUOTIENTS
5 Highest at 3-digit NAICS Level
Sources: IRS (top), 2007; Census Bureau, 2008
Source: FHFA, 1987Q1=100, NSA Source: BOC – Foreign Trade Division, 2008 Source: Internal Revenue Service, 2006
2008 Source: Moody’s Economy.com, 2008
Sources: Census, 2008 (household), BEA, 2008 (per capita)
Least Diverse
Most Diverse (U.S.)
Not due to U.S. Due to U.S.
Public
Moody’s Economy.com • www.economy.com • help@economy.com • Précis STATE • June 2009
5.3%
9.8%
63.1%
36.9%
3.7%
4.4%
11.2%
2.2%
5.9%
13.0%
13.8%
9.8%
4.0%
16.4%
Location
NAICS Industry Quotient
ND
5.7%
7.2%
68.6%
31.4%
4.1%
5.4%
11.8%
2.0%
5.5%
8.2%
14.2%
9.1%
4.2%
20.7%
Exports by Destination
Country Exports Share Total
Millions $ Exports %
World ………………………2,759.7…………….. 100.0
Canada …………………1,416.0………………. 51.3
Mexico …………………….198.7………………… 7.2
Russian Federation ……147.1………………… 5.3
Belgium ……………………..94.9………………… 3.4
Germany ……………………94.0………………… 3.4
Exports by Commodity
Commodity Exports Share Total
Millions $ Exports %
World ………………………2,759.7…………….. 100.0
Machinery ex elec. ….1,183.0………………. 42.9
Agricultural products ….611.5………………. 22.2
Transportation equip. …230.4………………… 8.3
Food & kind. prod. …….216.9………………… 7.9
Oil & gas ………………….208.1………………… 7.5
0.00
0.20
0.40
0.60
0.80
1.00
0.59
0%
20%
40%
60%
80%
100%
54%
ND U.S.
64
100
0
500
-500
-1,000
-1,500
-2,000
-2,500
-3,000
2005 2006 2007 2008
Net Migration, ND
ND U.S.
50
100
150
200
250
300
87 89 92 95 98 00 03 06 09
Median Household Per Capita
ND U.S.
47,205 50,233 39,321 39,751
Federal ……………………………………………… 9,567
State ……………………………………………….. 23,208
Local ………………………………………………. 43,250
> 200K
1.7%
100K-200K
5.7%
75K-10 0K
8.1%
50K-75K
14.8%
< 50K
69.8%
Into North Dakota Number
of Migrants
Minnesota 5,093
South Dakota 1,181
Montana 918
Texas 828
California 781
Colorado 539
Washington 498
Wisconsin 459
Florida 436
Arizona 417
Total Inmigration 17,599
From North Dakota
Minnesota 5,585
South Dakota 1,267
Texas 976
Montana 845
Colorado 714
California 689
Arizona 643
Florida 563
Washington 552
Wisconsin 388
Total Outmigration 19,093
Net Migration -1,494
University of North Dakota 6,240
Minot Air Force Base 5,146
MeritCare Health System 3,691
Altru Health System 3,250
Grand Forks Air Force Base 2,430
Medcenter One Health Systems 2,200
North Dakota State University 2,127
St. Alexius Medical Center 2,001
Microsoft Business Solutions 1,245
Bobcat/Ingersoll-Rand (Melroe Manufacturing) 1,006
Hugo’s 900
LM Glassfi ber 883
MDU Resources Group, Inc. 822
U.S. Bank Service Center 770
Noridian/Blue Cross Blue Shield 719
Wal-Mart Stores, Inc. 700
Case New Holland Corporation 672
James A. Haley Veterans Hospital 655
Aetna, Inc. 635
Phoenix International Corporation 597
Sources: Combined lists and Moody’s Economy.com, 2008
213 Support Activities for Mining 4.71
486 Pipeline Transportation 2.79
212 Mining (except Oil and Gas) 2.51
221 Utilities 2.11
333 Machinery Manuf. 2.02
Moody’s Economy.com • www.economy.com • help@economy.com • Précis STATE • June 2009
North Dakota
Hiring among the state’s industries was relatively robust last
year. ND only recently fell into recession because of the downturn
in commodity prices and weakness in manufacturing related to
falling demand for the state’s durable goods. ND’s industrial
employment diffusion index extended its decline through the
first quarter of 2009, as job losses among supporting services
accompanied declines in energy-related and manufacturing
industries. Still, job losses in the first quarter were not as pervasive
as they were nationally.
ND has made considerable income gains over the past several
years, but this trend will not persist. A favorable labor market,
combined with record high oil prices and farm commodity prices,
pushed income growth to be double the U.S. average in both 2007
and 2008. In fact, per capita income nearly closed the gap that it
has held with respect to the U.S. since early 1980s last year. Strong
income growth will cease this year, however; commodity prices
have fallen from their record peaks, and wage and salary growth
is already slowing as the labor market weakens.
Manufacturing has not been immune to the global decline in
demand for durables, and a near-term rebound is not imminent.
ND’s primary export destination, Canada, is in severe recession.
Therefore, demand for ND’s products has weakened greatly,
spurring job losses among manufacturers. Bobcat, which has
plants located in Sargent County and Bismarck, has announced
the layoffs of 250 employees. John Deere is also eliminating 90
jobs at its Valley City facility. To date, manufacturing employment
has contracted by 5%, but with the global economy not expected to
begin recovery until later this year or early in 2010, manufacturers
are expected to trim payrolls well into next year.
ND’s housing market is faring much better than others, but
it is not immune to consumer pessimism and tightened lending
standards. While house prices are tumbling nationally, prices in
every major market of ND are still appreciating. The rates of price
appreciation are slowing, however, as home sales are falling. The
decline stems from of a combination of factors, including low
consumer confidence because of rising unemployment, tightened
lending standards, and more recently, an increase in mortgage
interest rates. Reduced sales are not only affecting prices, but they
are also limiting new residential investment.
Existing-house price index, % change year ago (R)
Permits, ths (L)
0
1
2
3
0
2
4
6
8
10
04 05 06 07 08 09
Tight Lending Standards Crimp Housing Demand
Single-family; Sources: Moody’s Economy.com, Fiserv, FHFA
North Dakota U.S.
10
20
30
40
50
60
70
80
07 08 09
North Dakota Firms Are Hiring
Industrial employment diffusion index
Source: Moody’s Economy.com
North Dakota U.S.
24
26
28
30
32
34
36
38
40
00 01 02 03 04 05 06 07 08
North Dakota’s Income Gap Closing
Per capita income, $ ths
Source: Moody’s Economy.com
Manufacturing employment, ths (R)
Industrial production, index, 2002=100 (L)
96
98
100
102
104
106
108
110
112
23
24
25
26
27
00 01 02 03 04 05 06 07 08 09
Manufacturing Hit Hard by Global Recession
Source: Moody’s Economy.com
Moody’s Economy.com • www.economy.com • help@economy.com • Précis STATE • June 2009
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