A Closer Look at Employment in North Dakota and Region 8

A Closer Look at Employment in North Dakota and Region 8

Unemployment rates in the states that comprise HUD region 8, including Colorado, Wyoming, Utah, Montana, and the Dakotas, have been consistently lower than the national jobless rate.

Last Monday, the Bureau of Labor Statistics released its Regional and State Employment and Unemployment Summary for January. According to the report, among the states that had the lowest jobless rates in January were North and South Dakota, at 2.8 percent each. These two states, part of HUD’s Region 8, have been among the best-performing states in the country in terms of unemployment rates, especially since the Great Recession. In fact, the states that make up Region 8 — Colorado, Wyoming, Utah, Montana, and the Dakotas — have unemployment rates that have been consistently lower the national jobless rate.

These states may have outperformed other states and the nation as a whole, but it is interesting to look past the unemployment rate and examine the differences in job growth across the region itself. A breakdown of the labor conditions of these states for the fourth quarter of 2015 can be seen in Region 8’s Regional Report.

During the quarter, total nonfarm payrolls in the Rocky Mountain region saw an increase of 1.6 percent compared with the same period a year earlier. This growth of 87,600 jobs was led by increases in jobs in the education and health services sector and the leisure and hospitality sector, which both grew by 3.4 percent. The gains in these sectors compensated for slow growth in the mining, logging, and construction sector and the wholesale and retail trade sector, which grew by only 0.9 percent and 0.4 percent, respectively.

The lack of growth in mining, logging, and construction jobs has been interesting to many analysts of the region because this sector includes jobs in the oil industry. Researchers have been concerned that falling oil prices would lead to massive job losses in much of the region. Specifically, analysts have focused on the impact of low oil prices on North Dakota, which relied heavily on the oil boom to improve its economy before and after the Great Recession.

After the Great Recession, North Dakota had a notable increase in the number of jobs created. In the third quarter of 2009, the state’s nonfarm payrolls were 366,600, which increased 27.6 percent to a peak of 467,800 in the fourth quarter of 2014. Many commentators attributed this growth to the oil industry and its spillover effects, as rising oil prices and oil production in the Bakken Formation boosted the industry in the state. Nonfarm payrolls for the mining and logging subsector (which includes oil-related jobs) surged from 6,600 in the third quarter of 2009 to 31,500 in the fourth quarter of 2014 — nearly a fivefold increase. Since this peak, however, jobs in this subsector have fallen rapidly. In the fourth quarter of 2015, mining and logging jobs in North Dakota totaled 19,200, a decline of roughly 40 percent.

Total nonfarm payrolls in the state have fallen at rates that concern many analysts, although the decline is not as large as that in the mining and logging subsector. From the fourth quarter of 2014 to the fourth quarter of 2015, total nonfarm payrolls fell by approximately 4.4 percent in North Dakota. Some observers had been concerned about how the slowdown in oil production would affect jobs in the state but were relieved that it did not result in job losses as great as some had forecasted, at least for the fourth quarter. This may be due to the mining and logging sector’s relatively small share of jobs (4.3%) compared with total nonfarm payrolls. By contrast, the government sector and the education and health services sector, which have seen their payrolls grow, make up a much larger share of jobs in the state, at 18.3 and 13.7 percent, respectively.

Nevertheless, the 4.4 percent decline in total nonfarm payrolls is a significant loss of jobs for the state, especially when 44 states — including four of the five other states in Region 8 — saw increases in payrolls in the fourth quarter, according to the Regional and State Employment and Unemployment Summary. Going forward, job losses in oil-related industries will continue to negatively affect North Dakota, especially if oil prices continue to fall and oil companies continue to scale back production. Reductions in oil prices and production levels could result in negative spillover effects on other industries and squeeze governments whose finances rely on the oil industry, further harming employment growth in the state. As a result, despite having one of the lowest unemployment rates in the country, North Dakota’s employment situation may continue to be difficult in the near future at a time when other states in its region and across the country are growing.