The recent drops and volatility in commodities markets, particularly oil, are well-known. One of the big ongoing questions for the state of North Dakota is the impact on the state economy of these new developments in oil. We have seen that oil and gas output is not necessarily suffering with the price decreases or volatility. So where are the effects? You might expect to see it in a graph of labor force, like this:
The pronounce decline at the end probably tells the story that many would expect. A decline in price for oil creates a drop in the labor force in North Dakota. I am not suggesting oil prices have nothing to do with this, but when you look at the Bakken counties labor force, you see a different picture:
County level data is available only as a non seasonally adjusted data set so it is not exactly comparable but there is little sign of a decrease in the labor force in the Bakken counties. There really is not even a sign of a slowdown in labor force. The share of state labor force coming from the Bakken counties continued to increase as well:
Here we can clearly see a moderation in the share of labor force increase after 2012. Note though that it has not stopped the upward climb, even given the recent news. This says that impacts are more complex than a simple “oil counties will suffer” story. If anything I think it likely that the impacts are first felt in the areas peripheral to the oil patch. Work farmed out to Grand Forks, Bismarck, or Fargo would be my candidate to cut first due to transportation costs.
We also do not know about productivity increases or cost decreases in the oil patch, especially for the oil producers. That is a very big question mark hanging over the forecasts for the demise of domestic oil. The service providers are another group likely to be hit with negative consequences before the oil producers themselves. All this goes to just reiterate the point that the effects of oil price volatility are not necessarily producing the basic, straightforward predictions that the oil industry in North Dakota will dry up.