We need a new way to talk about labor markets in North Dakota

It is typical to celebrate low unemployment rates in North Dakota. While that may be something that worked in the past, the unemployment rate nationally is so low that this fails to be a point of distinction for the state. The persistent low level is also a potential issue.

The fact the rate remained low for so long should provide some concern. It is too low to attract some businesses and some labor. We need to reframe the discussion a bit. For example, are we interested in attracting employers or workers?

If we are interested in attracting workers then I suggest we talk about job openings and the number of unemployed. Shown in the graph above it should be clear that across the state there are not enough unemployed to fill all the job openings. This should go a long way to attracting about. I say “should” because there are enough government sponsored disincentives now that discourage the movement of labor around the country.

This same graph may discourage some employers moving into the area too. If labor markets are truly this tight the natural assumption is that wages will start to rise. This could deter entry on the part of some firms. It is also the case that there may simply be too few workers available. Wage increases may work some, but it may just be the case that North Dakota will not fit the proper scheme for a business that is relatively labor intensive at this time.

You surely want to discuss your economic successes, and low unemployment certainly counts as an economic success. As with many things in the business world, this claim has further consequences that are not as straightforward or unambiguously positive as we might find with other metrics.

2 Comments, RSS

  1. Michael Loebach February 14, 2020 @ 9:52 am

    Interesting points. North Dakota is an interesting comparison to the rest of the plains states/midwest. In Iowa (where I live), we have historically had an unemployment rate below the national average and folks often point to that number to try and prove that the economy is doing well. The missing factor in that data point though is out migration. Iowa has had brain drain for literally a century (which shows up in lack luster population growth). I suspect the same dynamic is at play in ND, but ND has had major employment shifts (type and region) due to the energy boom.

    Curious, what are the government sponsored disincentives to the movement of labor? I understand if you are meaning international movement of labor, but are there policies related to domestic labor you are thinking of?

    • David February 19, 2020 @ 4:39 pm

      Great to hear from you! So let me preface by saying that I am strongly in favor of a social safety net. However changes made in the financial crisis to the length of benefits allowed structural economic issues to persist. Rather than relocate to areas with higher wages or best options for employment people stayed in place. Add to that housing policies that discouraged migration and you allow labor issues to persist.

      I think the outmigration issue exists in ND too and it is also very specific parts of the age distribution. I am not sure that can ever be overcome though so I almost think you take that as a given and focus efforts elsewhere.

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