Rapid Growth in N.D.

24/7 Wall St. recently ranked North Dakota as the #2 best managed state; this was, in part, due to their fast growing economy and low unemployment rate. Bruce Kennedy wrote an interesting article which highlights some of the growing pains experienced by Minot, a North Dakota city which has a 2.3% unemployment rate. Apparently, one business is so desperate for workers that they are willing to fly employees from Wisconsin and put them up in a motel (a 500 mile commute), just to staff their store. The town is so frantic to house out of state oil workers that some investors have converted a retirement home into a hotel, taking little time for renovation. The town's schools are stretched and construction on hotels, housing, restaurants, etc. have ramped up. However, this boom sounds reminiscent of historical coal towns, many of which have become ghost towns. The challenge then, for Minot, is how to appropriately grow the city without the oil companies there taking on the form of a watered down version of a monopsony. Put another way, how will the town remain viable if the oil wells dry up or a technological innovation causes the demand for oil to fall drastically? The article quotes a Mr. Jerry Chavez (CEO of Minot Area Development Corporation) who is making efforts to carefully plan zoning and establish "proper infrastructure." Mr. Chavez is counting on the arrival of young families and their subsequent demand for professional occupations such as doctors, nurses, teachers, lawyers, etc. to establish a strong foundation which could support their long term growth goals. It will be interesting to see if Minot can succeed where so many towns in West Virginia have failed.


Dr. Tufte said...

Dominick: 100/100.

FYI: a student in this class last year actually went to North Dakota and worked as a driver, and blogged about it here and here.

News flash: cash pouring into state coffers in big, easy-to-carry bags papers over a lot of problems. I'm not saying North Dakota was ever a badly managed state, but I think the report in the first link was mailed in by a journalist that lacked perspective: economic growth solves a host of problems.

I think the situation in North Dakota is fascinating. If the oil production stays for long enough, there probably will be no problem ... just look at Texas. But if it plays out, who knows? Personally, I'm glad I can watch it from a distance.

Da Boy said...

While I agree with Dr. Tufte, large infusions of cash in short amounts of time can cover many issues, I don't think it will slow down any time soon. Dominick stated that new technologies could reduce our dependence on gas and oil. At this point, I don't see the technology being close enough to slow consumption for at least a generation. The fracking and extraction that is occurring in North Dakota is the new technology, for now. Until it becomes more economically feasible to pay for batteries, electricity, or some other pricey alternative to petroleum, we will rely on this form of energy.

Dave Tufte said...

Da Boy: 50/50.

I agree. I was just doing the on-the-one-hand-and-on-the-other-hand thing that professors do. ;)

Clayton Parry said...

I agree with Dr. Tufte and Da Boy, in the short-run this may appear to be a good thing but the long-run is harder to predict. For North Dakota’s current economy the perfect storm of economic conditions have helped them reach this point: high demand for housing due to previous losses from flooding, new technology that allowed oil production to rapidly increase, and high unemployment everywhere else.
In the long-run additional factors could rise that could cause North Dakota’s economy to level off or even into a tailspin: increased government regulations on oil production, higher crime rates, housing supply catching up with demand, or even higher employment throughout the rest of the country. Only time will tell if this is North Dakota’s 15 minutes of economic fame or if they are going to remain in the ranks of states like Wyoming and Texas (or other states whose economy is largely based upon the natural resources of that state).

Dave Tufte said...

Clayton: 50/50.

I'm not so sure it's a perfect storm. This is exactly what an economist would predict would result from high prices for oil.

Here's something cool. Check out this recent photo from NASA of the U.S. at night. What's so cool is that you've always been able to spot the big cities, and trace out the interstates, but now there's a big blob of lights in North Dakota where there are neither. It's just oil fields.