What is the likely effect of oil price declines on the Grand Forks regional economy? This is a question I get quite often right now, and it is difficult to answer. While I investigate I thought we could look at the employment situation in Grand Forks county over the last several years. There are a couple of interesting things to consider. First, let’s consider the percent change, year-over-year, in Grand Forks county employment.
I thought I would update some of the employment numbers I posted before on the site. The Bureau of Labor Statistics released revised numbers for October and preliminary numbers for November. Based on these releases employment from October 2014 to November 2014 declined by 4,291. (Cue dramatic music.) Of course this is a great concern for many, and I do not fault them for that. Oil and gas extraction, and the closely related industries, were clear growth leaders for the state as a whole over the last few years. But let’s take a closer look.
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:
Pretty much anytime I give a talk or go on to KNOX radio I get questions about the pace of apartment building in Grand Forks. People believe fundamentals do not justify the extent to which construction currently occurs. I generally agree and think there are a few reasons behind it. This article from the Wall Street Journal seems to indicate the local circumstances may just be part of a larger national trend.
The importance of oil to recent economic performance in North Dakota is well-documented. As the biennial legislative session gets underway the price declines of the last several months are likely on everyone’s mind, and rightly so. This Wall Street Journal article details the difficult decisions facing oil companies in the relatively near future as far as capital spending, dividends, and other expenditures are concerned. This New York Times article discusses the scaling back in rigs across the country due to lower oil prices.