Recession obsession: Will North Dakota weather the shaky U.S. economy?
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Feb 27, 2008 - 08:39:57 CST
By CRYSTAL R. REID
Bismarck Tribune
A billboard message from the 1970s:"North Dakota refuses to participate in a recession."
North Dakota State University applied economist Larry Leistritz said he recalls that message posted on a billboard outside of Fargo from the 1970s, when the rest of the nation braced for a recession that took its time getting to North Dakota.
Experts say the same could be true today.
The nation's obsession with recession stems from rising consumer costs, a crippled mortgage market, unemployment, skyrocketing energy costs and food prices. The producer price index jumped 1 percent in the last month, according to the Labor Department. Prices for corn and wheat surged, gasoline prices rose 2.9 percent last month and wholesale prices for home heating oil increased 8.5 percent. Food prices rose 1.7 percent.
Home sales across the nation remain sluggish; bankruptcies in 2007 surged in some states, but remained stable in others. In North Dakota, the bankruptcies went down and home prices continue to increase.
On Tuesday, the president told a radio show that America was not in a recession, and would not go into a recession in 2008. He called it a "softening"and a "slowdown."Many economists have said the same thing, indicating the economy will still grow, but at a slower rate than expected.
Which means that states such as North Dakota, dependent on not just one or two key industries but several, may weather the storm.
If the nation's economy were a neighborhood, North Dakota's house would have some sturdy walls and a solid foundation:The robust energy and agriculture industries are its insulation; the state's foundation is its diversified economy. The roof, the walls, are the key industries whose stability North Dakota depends on:ag, energy, tourism, manufacturing and technology.
"In all of these areas, we've seen job growth in our state,"said Shane Goettle, director of the North Dakota Department of Commerce. "But there's no secret here. It's important for us to maintain a focus that allows investment, (encourages)entrepreneurs."
The state isn't bullet proof. Consumers will still feel price increases in their energy prices, fuel and food costs.
But the Bismarck-Mandan community and North Dakota continues to post wage and job increases in its key industries. In fact, experts say the same rising costs felt by consumers in food and fuel also benefit the state's communities.
"North Dakota is probably more resistant to high oil prices, certainly because we are an energy state,"said Karel Sovak, an economics professor at the University of Mary. "Not too many states in the union benefit from high oil prices."
It spurs more retail and development, not only from traditional energy but also from investments in renewables; energy has become multi-dimensional, with oil, wind, coal, lignite, ethanol, biofuels.
Economists say industries such as tourism should begin to feel the consumer confidence pinch, but Goettle said North Dakota will continue to benefit. Canadian tourists still drive strong retail growth, and state residents' desire to travel close to home keeps Dakota dollars in-state.
"You might think (the tourism industry)would be vulnerable, except for our proximity to the Canadian border,"he said.
Leistritz said North Dakota's economic stability stems from state priorities identified about 20 years ago, when the state was struggling through its own economic crisis. The contemporaneous growth in the early '90s may be attributed to those early initiatives, he said.
And that growth and diversification remains in place today.
"Generally, we think diversification is a good thing,"he said.
But that diversification also means that more businesses depend on markets outside the state, such as the manufacturing sector and information technology services.
Goettle said the state's manufacturing sector continues to grow; indeed, in 2007, North Dakota was one of three states to grow its manufacturing sector. Despite that growth, some of the industry's use of component parts, plus sales and equipment could be effected by a slowing national economy, although Goettle noted that the state's manufacturing giant, Bobcat Co., does depend on global markets.
Mike Anderson, head of the North Dakota Housing Finance Agency, said it's more difficult for his agency to sell the tax-exempt mortgage bonds they use to finance a first-home buyer program. The typical investor in these types of bonds is having difficulty with some of the issues in the sub-prime market, he said.
"The thing that's going on, some of the issues in the investment community, it's going beyond selling tax-exempt bonds, it's effecting all areas of the investment community,"Anderson said. He said that pressure hasn't peaked and is far from over.
Again, North Dakota is not completely insulated or recession-proof. Russ Staiger, director of the Bismarck-Mandan Development Association, said if the economy gets bad enough, it will begin to affect the local community.
With increasing prices, lifestyles change. The whole world is changing, he said,"It's something that we're going to feel, just like everybody else."
But he remained optimistic about the Bismarck-Mandan community, its low unemployment rate, its job growth and the wealth of industries such as agriculture, medical services, energy and technology.
"The general strength of the community is just strong,"he said. "There are a lot of communities around the country that would love our economic circumstances."
(Reach reporter Crystal R. Reid at 250-8261 or at
crystal.reid@bismarcktribune.com.)
Bismarck Tribune - Bismarck News - Recession obsession: Will North Dakota weather the shaky U.S. economy? (http://www.bismarcktribune.com/articles/2008/02/27/news/topnews/149803.txt - broken link)
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Ok so the article is a little flawed: It seems to imply that ND's economic diversity is allowing it to weather the recession when its really ND's dependence on Ag & Energy (i.e. a lack of economic diversity) but the point is pretty true: We'll be sitting pretty as long as commodity prices stay high - & until China gets hit by an asteroid, commodity prices are staying high.
I say we get to printing some more billboards!
In Other News: North Dakota first in export growth
Bismarck Tribune - Bismarck News - North Dakota first in export growth (http://www.bismarcktribune.com/articles/2008/02/26/news/local/149698.txt - broken link)
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I cant remember if it was on NBC or CBS but it wasnt on ABC. It was last night, Saturday.
