Unemployment Remains Too Low in ND

Bank again after recovering from the various health ailments. As you can see I maintain, as I have for the better part of two decades, that the unemployment rate in ND is too low. It is symptomatic of a larger problem, the lack of available labor. It represents a constraint on future economic development and growth prospects.

Some take my last statement to mean growth or development will not happen. This generally makes me happy because I then get to scold them for not reading carefully. Growth and development can and will happen, I merely say they are constrained. That is, they are likely to be less than could be realized with more available labor. How low is too low? That is a fair question, and one for which I do not have a great answer. Consider the recent history of the unemployment rate:

Aside from the onset and immediate response the the COVID-19 pandemic we can see the ND unemployment rate was consistently below 4% and in many periods is below 2%. This is amazingly low unemployment. There is literally no available labor out there. Projects announced that plan to add 100 jobs should be treated with some skepticism. Why?

From where will we get these 100 employees? They are not out there waiting for jobs. If the new firm gets its workers, a large chunk of them will come from the stock of the currently employed at other firms. This can be a net gain for the economy if the workers move into higher paying jobs with greater value output. This is not all gain though, as the losses to the firm now short of workers must be taken into account. With this overall circumstance I want to also consider the Bakken area.

In this picture I display the unemployment rate for Dunn, McKenzie, Mountrail, and WIlliams counties (in green), as well as the unemployment rate for North Dakota, removing the four Bakken counties (blue). The interesting part of this is the variation in which series is higher. You can tell when the price of oil experienced market pressures: when the green series jumps above the blue in the chart.

I submit though the rate in the Bakken area is too low as well. How much oil activity and broader economic development did not occur in the last ten years for lack of available labor resources. Of course there is no clear policy solution to this. Forced relocation is not tenable nor desired. Increased birth rates would solve the problem in around 20 years, perhaps just in time for the problem to no longer be an issue.

North Dakota needs to get its head around the issue of labor shortage. It is a broader problem in the US now which makes solution that much more difficult. We are competing with many other states for labor resources and would benefit from a larger conversation around policy for economic growth and development in the state in the face of a likely labor constraints.

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