It is a fun time to be an economist with an interest in data, and it has nothing to do with election policies because, as we all know, those have nothing to do with data anyway (zing!). The Bureau of Economic Analysis released its GDP by Metro Area report this week (available here). The first question many would have is: why do we care about a report that covers 2015, that is in the past?
So the BEA release (follow this link to the data) this week revealed a large decline in North Dakota GDP from 2014 to 2015. Not a real surprise. As a minor note, I prefer to use the quarterly data instead of the annual data, not because it tells a very different story, but there are some distinctions. That is what I will be using in this discussion. I am also looking at the real GDP data to control for inflation changes over this time.
Many times people asked me about the relative importance of the agriculture sector and the mining sector so I thought I would show some current data. Now the coal industry output remains almost the same over this time frame, so the oil sector is responsible for the growth. The data run from 2005Q1 to 2015Q3 and the lines display each sector as a share of total GDP (private and public sector).
There is a big deal about understanding the impacts of oil price changes on the state economy given the legislative session underway in Bismarck. I am obviously all for such efforts. To that end I have a few graphs to offer up. Let’s consider the share of the private industry component of North Dakota Gross Domestic Product (GDP). Here is a first picture to consider:
Thinking about fiscal policy dominates my time lately. Mostly my concern is with parsing the data in such a way to make sense of the various arguments out there about the proper course for fiscal policy. Recall that I doubt that anyone is willing to reduce spending by enough to balance the budget. So if we are to see balanced budgets at some point, the timing of that is a topic for another post, it seems likely to me that tax increases will be necessary. Anyway, those policy issues will be covered another day.
In a post last week I compared the allocation of economic activity in North Dakota with the United States. North Dakota has a larger share of activity in agriculture and extractive industries, but less in industries like information. There are many factors that influence the share of economic activity including resource endowments, transportation networks, and the list goes on. Consequently you need to be careful drawing policy conclusions from differences in allocations between two geographies. It could be very easily explained by resource endowments, such as oil in the ground.
One of the more common questions I get, from students, people at the store, on the radio, is: how would the U.S. economy would perform if it was more like North Dakota? It is a natural question given the strong performance in North Dakota and the weaker performance in the U.S. At some level this makes the comparison of growth a bit more consistent because the distribution of activity is made identical between multiple regions. In demography/population analysis (a class I am teaching this summer) the process is called standardization. It is essentially the same idea as calculating real gross domestic product with base year prices to control for the effects of price changes on growth. So lets take a look at unemployment and real GDP for the US, MN, and ND.
The GDP report for Q3 is out (available here) and it might seem good news. Q3 2013 growth is 2.8%, but it comes from inventory accumulation and that is not good. Firms added to inventories of goods which means they will need to produce less in Q4 so hiring may still be weak.
The Census Bureau released the Advance Sales Report for Retail and Food Services today (available here). While not stellar the nominal increase in sales, year-over-year, was three percent. The Conference Board also released their report today on Consumer Confidence, and it fell significantly (available here). This is why I posted that it matters more what people do than what they feel or say they will do in the future.
The official release of the advance estimate of Q2 GDP today was actually greeted with a sigh of relief. What does it say about the economy when at 1.7% rate generates relief? The relief of course is because it is not worse, but this number is subject to significant revision and so it may only be a temporary stay. I get asked on the radio all the time about economic recovery. The answer remains the same: there is recovery, but it is wholly inadequate to make people “feel” like recovery has taken hold.