Saturday, August 04, 2012

North Dakota: America's "Economic Miracle State"

The Philadelphia Federal Reserve recently released June Coincident Economic Activity Indexes for all 50 states, along with a national coincident economic activity index.  These indexes are based on four economic indicators: a) nonfarm payroll employment, b) the unemployment rate, c) average hours worked in manufacturing, and d) wages and salaries.

The chart above displays the indexes for North Dakota and the United States over the last ten years, showing that the economic activity in North Dakota is completely "off the charts," along with the state's oil production and oil jobs, which are also showing explosive growth and driving economic growth in the "miracle state."  Even the "worst recession since the Great Depression" barely affected the shale oil-based economic activity in the Peace Garden State, and the June coincident index is 25% above the pre-recession level and almost 11% above a year ago.  Meanwhile the coincident economic activity index for the overall U.S. economy fell about 10.5% during the Great Recession and is now still less than 1% above the previous peak in early 2008.

The Philadelphia Fed also recently released its "State Leading Indexes" for the month of June, which "predict the six-month growth rate of the state‚Äôs coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill." North Dakota's leading index for June predicts a 3.8% growth rate for the state's economy over the next six months, by far the highest expected growth rate among the 50 states (only No. 2 Ohio comes even close at 2.6%), and a rate of growth almost four times higher than the expected 1% at the national level.   

MP: The June coincident and leading indexes for the 50 states and the national economy provide additional support that North Dakota is the most economically successful state in the country thanks to its booming energy sector and pro-energy and pro-business policies - the "Dakota Model."  On every relevant measure of economic performance by state: job creation, unemployment rate, income growth, output growth, growth in oil production, tax revenue collected, construction activity, home foreclosure rates, housing prices, coincident and leading indexes, etc., the Peace Garden State leads the country and deserves the title of America's "miracle state." 

17 Comments:

At 8/04/2012 5:52 PM, Blogger Bruce Oksol - oksol@yahoo.com said...

I'm curious what is driving Ohio's economy? According to the post, Ohio is #2 to North Dakota, going forward.

 
At 8/04/2012 6:19 PM, Blogger Rufus II said...

The Three States with a Coincident Economic Activity Index Greater than 1.0 are

Massachusetts (has Obama/Romneycare)

Ohio (which Romney needs to win,) and

N. Dakota

Philadelphia Fed Coincident Economic Activity Index

 
At 8/04/2012 7:22 PM, Blogger VangelV said...

MP: The June coincident and leading indexes for the 50 states and the national economy provide additional support that North Dakota is the most economically successful state in the country thanks to its booming energy sector and pro-energy and pro-business policies - the "Dakota Model." On every relevant measure of economic performance by state: job creation, unemployment rate, income growth, output growth, growth in oil production, tax revenue collected, construction activity, home foreclosure rates, housing prices, coincident and leading indexes, etc., the Peace Garden State leads the country and deserves the title of America's "miracle state."

The problem for ND is that shale gas is a failure and shale oil is not yet proven to be viable for non-core areas. The data is showing that economic activity is high but all bubbles stimulate higher economic activity.

 
At 8/04/2012 10:19 PM, Blogger Breaker Morant said...

I wonder how much of Ohio's growth is oil and gas related. Not only direct Utica growth, which is in early days yet-but also manufacturing materials for other shale areas outside the state-numerous references on google to Ohio companies making pipe for the Marcellus and so forth.

 
At 8/05/2012 6:47 AM, Blogger Zachriel said...

You have a small population and lots of oil. Isn't that like saying Saudi Arabia is an economic miracle?

 
At 8/05/2012 8:14 AM, Blogger Bill M said...

VangelV, that would be a 50 to 70 year bubble. I'm sure every state in the union would be happy with that.

Zachriel,

No, it's not. There are federal taxes on that oil and we live in a democracy. Get a clue

 
At 8/05/2012 8:50 AM, Blogger Jon Murphy said...

Well, this is a pretty good report:

Over three-quarters of the states rose.

16% declined.

Nearly 30% of states rose by 0.6% or greater.

No sign of a recession here.

 
At 8/05/2012 9:19 AM, Blogger Mark J. Perry said...

Yes, and the Leading Indexes are positive for 33 states, and the national leading index is positive at 1.01% expected growth over the next six months. Sluggish economic growth is certainly what we can expect over the next six months, but there's nothing here in either report (state coincident and leading indexes) to suggest a current or pending recession, as Jon Murphy comments.

 
At 8/05/2012 11:36 AM, Blogger VangelV said...


You have a small population and lots of oil. Isn't that like saying Saudi Arabia is an economic miracle?


No. SA has cheap oil and lots of it. ND has expensive oil that is only economic in a very small area that depletes very rapidly when produced.

 
At 8/05/2012 11:36 AM, Blogger VangelV said...


You have a small population and lots of oil. Isn't that like saying Saudi Arabia is an economic miracle?


No. SA has cheap oil and lots of it. ND has expensive oil that is only economic in a very small area that depletes very rapidly when produced.

 
At 8/05/2012 11:40 AM, Blogger VangelV said...

VangelV, that would be a 50 to 70 year bubble. I'm sure every state in the union would be happy with that.

Sorry but anyone who is thinking of that time frame is either ignorant of the data or a naive fool. I expect that Bakken production will peak within five years at the latest. It would not surprise me if we did not see lower production within two years. No matter how we tell the story the economics have to work and so far they have not. There are no cash flow positive operations in the Bakken even for companies that have been drilling for more than half a decade.

 
At 8/05/2012 11:58 AM, Blogger pbuxton said...

You're forgetting which states got the most money from the Spendulous. No one will disagree that giving person A money won't help him. People not addicted to welfare will remember that money came from 10 other people, all now a little worse off.

 
At 8/05/2012 12:55 PM, Blogger bart said...

Jon Murphy said...
Well, this is a pretty good report:

Over three-quarters of the states rose.

16% declined.

Nearly 30% of states rose by 0.6% or greater.

No sign of a recession here.


What did it look like in mid 2007. not long before the last recession?


Recession indicators with these stats don't look rosy, especially the continuing growth in total unemployed

 
At 8/05/2012 1:08 PM, Blogger Gun Trash said...

I'm curious what is driving Ohio's economy? According to the post, Ohio is #2 to North Dakota, going forward.

Simple, the Buckeye voters smartened up and replaced a dimocRAT governor with a Republican governor and their legislature is firmly Republican, again.

Couple a balanced state budget and business-friendly governor/legislature and you'll see a rise in the traditional manufacturing sector. Witness the boom in the manufacture of shale extraction supplies. That's why the Buckeyes are #2.

Also, Hi Point firearms are manufactured in Mansfield, OH and gun dealers sell the low priced, but reliable weapons as fast as they are produced.

Guns and oil, you can't get much more American then that!

 
At 8/05/2012 2:13 PM, Blogger Jon Murphy said...

What did it look like in mid 2007. not long before the last recession?

In mid-2007, the indicators were still signalling growth, as the economy was still growing. This is a coincident economic indicator and has no predictive power of its own.

By late 2007, the indicator had begun to decline, which is what you'd expect from a coincident economic indicator.

 
At 8/05/2012 11:15 PM, Blogger Gene said...

Another thing North Dakota did right: The banks there didn't give mortgages to people with marginal jobs, no down payment and a demonstrated history of not paying their bills.

 
At 8/06/2012 7:40 AM, Blogger Zachriel said...

Zachriel: You have a small population and lots of oil. Isn't that like saying Saudi Arabia is an economic miracle?

Bill M: There are federal taxes on that oil and we live in a democracy.

The original post concerned the economic success of a small population with active extraction of mineral resources. A similar chart for Saudi Arabia would show high economic per capita activity.

Mark J. Perry: The chart above displays the indexes for North Dakota and the United States over the last ten years, showing that the economic activity in North Dakota is completely "off the charts," along with the state's oil production and oil jobs, which are also showing explosive growth and driving economic growth in the "miracle state."

A similar chart for Saudi Arabia would show comparatively high economic activity. It's not a transferable model, any more than Jed Clampett.
http://www.youtube.com/watch?v=IjVzmIV8gwk

 

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