In an article at the Pacific Standard, Vince Beiser reports that the U.S. is in the midst of an enormous increase in petroleum production that’s set to completely reconfigure its own energy production economy and, by extension, the world’s:
Right now, the map of who sells and who buys oil and natural gas is being radically redrawn. Just a few years ago, imported oil made up nearly two-thirds of the United States’ annual consumption; now it’s less than half. Within a decade, the U. S. is expected to overtake Saudi Arabia and Russia to regain its title as the world’s top energy producer.
While this is a nationwide phenomenon, no state has had a more noticeable role than North Dakota. After spending decades languishing in the heart of “flyover country,” North Dakota has spent the last few years at the forefront of the national conversation, thanks to its part in the American oil and gas production boom. North Dakota’s oil industry is now the subject of Hollywood movies, National Geographic cover stories, and a hundred thousand arguments over what the future of America’s fossil fuel resources should be.
While only time will tell how the fracking debate will resolve itself, what there’s no doubt of is the extent to which oil and gas production have affected the North Dakota economy. North Dakota’s gotten some attention here on the blog before, as we’ve looked at the oil industry job boom, noted that North Dakota was leading all states in GRP gains, and examined the difficulties that North Dakota’s employers are experiencing in finding skilled workers. With the recent release of EMSI’s new 2013.1 dataset, we thought it was time to check in and see how North Dakota has been faring.
The answer, unsurprisingly, is “better than ever.” In 2012, North Dakota’s GRP was $39.3 billion, an enormous figure for a state with only 690,000 residents and an increase of $6.4 billion from 2010. In real per capita GDP figures provided by the BEA, North Dakota ranked No. 7 in the country at $50,096 for 2011. Since the beginning of the economic boom in 2005, North Dakota’s oil and gas industries have grown by an incredible 396.5%, compared to the nation’s otherwise impressive growth of 32.5%:
While there are other states with larger energy production economies, none are as concentrated as North Dakota’s. In 2012, North Dakota’s oil and gas industry had a national location quotient of 8.99 — nine times the national average. The state’s leading counties, however, had even higher concentrations. Williams County, which has almost half of North Dakota’s oil-industry jobs, had an eye-popping 2012 LQ of 67.17. The top 10 counties for oil and gas production looked like this:
North Dakota Oil-Producing Counties: Top 10 by Location Quotient
County Name 2012 Jobs 2012 Avg. Annual Wage 2012 National Location Quotient
Source: QCEW Employees, Non-QCEW Employees & Self-Employed - EMSI 2013.1 Class of Worker
Williams 10,795 $110,140 67.17
Slope 87 $93,719 65.25
Dunn 847 $102,583 64.38
McKenzie 1,303 $97,604 40.20
Stark 3,376 $111,871 32.84
Oliver 142 $99,550 32.37
Mountrail 965 $95,152 29.06
Burke 125 $106,713 23.79
Mercer 595 $108,103 23.28
Bottineau 416 $77,273 22.02
If you’re wondering where those are in the state, the map to the left shows how the concentration of oil and gas jobs is distributed across North Dakota’s counties. While North Dakota’s oil and gas industry is growing by leaps and bounds, it still only directly employs about 22,000 workers. North Dakota’s economy is booming because of the remarkable effect that energy production has on other industries. Since the beginning of the oil boom in 2005, the average growth across 4-digit-level NAICS industries with at least 500 hundred jobs in the state is a whopping 20%. Many industries are expanding at astronomical speed, as this table shows:
Fastest-growing industries: North Dakota
NAICS Code Description 2005 Jobs 2012 Jobs % Change 2012 Avg. Annual Wage 2012 National Earnings
Source: QCEW Employees, Non-QCEW Employees & Self-Employed - EMSI 2013.1 Class of Worker
2131 Support Activities for Mining 2,307 18,191 689% $106,477 $92,019
5324 Commercial and Industrial Machinery and Equipment Rental and Leasing 215 1,263 487% $106,124 $77,811
2371 Utility System Construction 1,015 4,195 313% $80,398 $73,053
4251 Wholesale Electronic Markets and Agents and Brokers 962 3,433 257% $99,683 $99,194
4842 Specialized Freight Trucking 3,052 9,399 208% $80,717 $54,193
2111 Oil and Gas Extraction 487 1,453 198% $132,000 $178,477
4529 Other General Merchandise Stores 1,883 5,062 169% $26,989 $28,471
4246 Chemical and Allied Products Merchant Wholesalers 340 879 159% $94,495 $87,357
4442 Lawn and Garden Equipment and Supplies Stores 248 638 157% $25,297 $33,452
4881 Support Activities for Air Transportation 233 517 122% $37,264 $54,929
5413 Architectural, Engineering, and Related Services 2,033 4,136 103% $91,514 $89,563
4539 Other Miscellaneous Store Retailers 776 1,433 85% $39,725 $31,528
2389 Other Specialty Trade Contractors 2,221 3,999 80% $58,907 $41,030
5611 Office Administrative Services 533 918 72% $60,910 $89,860
5619 Other Support Services 398 682 71% $22,002 $50,095
4238 Machinery, Equipment, and Supplies Merchant Wholesalers 4,026 6,823 69% $85,317 $73,063
8113 Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance 681 1,145 68% $53,874 $56,157
3341 Computer and Peripheral Equipment Manufacturing 518 836 61% $101,698 $180,917
4239 Miscellaneous Durable Goods Merchant Wholesalers 363 585 61% $46,411 $56,214
7113 Promoters of Performing Arts, Sports, and Similar Events 345 548 59% $13,425 $39,191
5613 Employment Services 2,424 3,786 56% $35,730 $36,651
5112 Software Publishers 1,095 1,640 50% $107,349 $155,509
3336 Engine, Turbine, and Power Transmission Equipment Manufacturing 508 747 47% $66,290 $91,752
2123 Nonmetallic Mineral Mining and Quarrying 622 909 46% $50,362 $66,545
Total 27,282 73,215 168% $80,143 $62,190
As the oil and gas industry expands, its effects are being felt throughout the North Dakota economy. Using the same set of nine occupations that we considered last time we blogged about the oil and gas industry, we found that their job multipliers ranged from 1.76 (oil and gas pipeline construction) to 5.37 (petroleum refineries). Every job that energy production creates directly adds anywhere from 1 to 4 more jobs elsewhere in the economy.
One interesting aspect of North Dakota’s population is just how much of it is actually employed. The state’s labor force participation rate, the percentage of working-age persons (ages 16-64) who are either employed or unemployed but looking for work, has held steady between 71-74% since 2007. North Dakota’s participation rate is significantly higher than the current national average of 63.6%. North Dakota is a state built around people with jobs, and not so much around families, the retired, and others who fall into the gap between employed and unemployed. The implication is that many of North Dakota’s jobs are held by unattached workers, or by members of dual-income families, and that many North Dakota workers are coming to work from out of state.
That last inference lines up well with US Census data. According to its OnTheMap tool, a large portion of North Dakota’s workforce is actually coming from out of state. While OnTheMap’s data is not available for a year more recent than 2010, the numbers are still informative. In 2010, over 10% of North Dakota’s workforce (34,116 jobs, to be exact) was made up of workers who were employed in North Dakota but lived out of state. Of these, more than a third (11,565) were under 29 years old. Incoming workers were also making good money, and similar wages to in-state workers; more than a third were earning over $3,333 a month, and almost the same percentage as workers who were actually living in North Dakota (36.3% of out-of-state residents vs. 36.6% of in-state residents).
Another strong sign of how North Dakota’s economy reaches outside of the state’s borders can be found in how the money the state produces is flowing out of the state. In 2011, North Dakota’s exports were an enormous $53.5 billion, a full 65% of supply. Compare that, for context, to next-door-neighbor South Dakota, whose larger population of 824,000 generated only $46.9 billion in exports. The industries where those out-of-state sales are occurring are also interesting. In most states, manufacturing has a clear lead in exports when we look at 2-digit industries. In North Dakota, however, it generates only a sliver more in exports than oil and gas ($7.7 billion vs. $7.40 billion). If we drill down to 6-digit industries, oil and gas is even more of a juggernaut. The drilling of oil and gas wells is the largest non-government exporter, at $2.86 billion, and support activities for oil and gas operations are close behind at $2.6 billion.
Going forward, there seems to be no reason to expect North Dakota’s economy to slow down any time soon. Barring the negative influence of unforeseeable external influences like costly new regulations on oil and gas production, energy production seems poised to continue having a powerful effect on one of the United States’ most remarkable state economies.
Data for this post comes from Analyst, EMSI’s web-based labor market data and analysis tool. For more information, contact Rob Sentz (rob@economicmodeling.com). Follow us on Twitter @DesktopEcon.
