A new school year is starting at UND and it seems an appropriate time to engage in a reset of what we know about the state economy. The fact is these situations are subject to change very quickly and for reasons well beyond the control of economic actors in the ND economy. With commodities comprising a significant share of ND economic activity it is a global price that really impacts profitability. What can we say that is going on at this point?
Labor constraints in North Dakota are not a new phenomenon. What is new is the situation with unemployment we have seen so far. At this point in the year we already have a record for unemployment claims.
Not only is it the record, it is the record by a mile. This is a drastic adjustment for both workers and for employers. The change in trajectory for sales necessitated workforce changes, and both are still in a situation of flux. As can be seen the state only really started to recovery process. Of further concern are those external factors I mentioned. If North Dakota products experience reductions in demand due to issues elsewhere, a very likely situation, the local dynamics will be impacted.
Oil sector impacts are well known, both to the positive and the negative. The pandemic reduced travel demand and therefore the demand for fuel, thus a decline in oil prices and activity in North Dakota. But what did this really look like?
Add in a nasty spat between Saudi Arabia and Russia and you see the lowest oil prices in decades. The decline was clearly to levels that were not profitable for ongoing production in North Dakota, as we can see in the next graph.
Oil production declined to levels not seen since 2014. These are enormous drops in activity and with it, an enormous decline in the necessary workforce. Recovery will happen, but the timing is uncertain as is the response from a workforce that went through two volatile market swings in 5 years.
These changes also impact. the public finances for North Dakota. While the monthly data clearly demonstrate volatility, there is clearly a downward move in the numbers. Of more concern is the composition of those sales. As people move to more online purchases there can be negative local economy impacts through store closures.
Recovery will happen, but it is not necessarily easy. There are multiple areas of the ND economy that experienced significant issues in the last six months. There will need to be multiple plans considered for the best chances at recovery.