Currently viewing the category: "North Dakota"

First, be sure to look at the report below this one. It was also just posted and covers the city sales taxes for July as well as the First Quarter 2014 state sales taxes.

As for this report, it is the most recent report about North Dakota oil and gas production. Another million barrels a day report. Even a little better than when North Dakota finally broke through that milestone last month. With more and more wells being completed we can expect that figure to continue increasing. Of course as more and more wells move into that post twenty month age that will lead to a daily decline, but we should have enough wells by then to stay in that category for many years for now.

Now the next interesting thing is what will happen to the natural gas production. We should see that become a major business in the state.

At this point it is just watching the market maturing.

 

I am presenting a more extensive report of sales taxes this month then I have in the past. Not only do I have the Grand Forks data and other major cities in the state for the month of July, but I also am presenting the first quarter 2014 state sales tax collections. Of course the time is different so we have to be careful in the analysis here.

That is, the first (top) table is taxes received by the cities in July. You will recall, if the businesses are forwarding the sales taxes they have collected from the consumers it should be for sales that occurred in May. The business then forwards the receipts to the state in June, and the state treasurer then sends the city that money on the 15th of July. That means on average the money the city receives was paid by the consumer two months earlier. The business got to use the money for about two weeks, and the state used it, or made interest on it, for six weeks.

As for the state sales taxes, the business gets use of the consumers tax payments for two weeks and then forwards it to the state for their immediate use. Of course the business acts as a collector of taxes and does not get paid anything for those administrative costs for being the governments.

An analysis shows the continuing slow down in the North Dakota economy. It is a slowdown that should be expected. It comes from two places. First, it is the maturing of the oil boom. Not a bust by any means, but a maturing of the explorations and an increase in the technology of drilling and the pumping. The costs of the wildcatting is now under control. This oil patch has to be the best organized, most efficient exploration ever. It has a success rate of well into the 90 percent category, a figure unheard of before.

The drilling and placing of the wells will go on for at least two more decades and longer if new technology is developed. This will be a development unlike any ever before, and that is good for North Dakota and for all of its sub-divisions, especially for some. It has taken some subdivisions that were disappearing from North Dakota history and turned them into some of the wealthiest in the state.

The second slow down is in the agricultural sector. The interesting thing for economists is that the oil boom, this never before seen level of economic activity in this state, and the nation is taking place at the very time that the largest, most extensive agricultural boom is also occurring. There may have been times when adjusted for the value of the dollar that farmers received more for their products in the past six to ten years, but there never has been a time when this level of prices lasted for this long of a period.

Not only that, but it was happening when new technology was happening at a level not only never recorded, but not ever imagined. Tractor horsepower increased from moderate levels to unimagined amounts. Satellite technology became common place on the farm, in the field. It was used to steer the tractors and combines, to set the machinery, to till, plant and harvest in ways unimagined not a decade before.

While at this time the boom has not turned into a bust, but it has created a significant slow down in the returns to the farms, and that has “multiplied” itself all the way across the state. Machinery sales are down significantly. Money for the farmers to buy business investments and personal purchases have declined significantly. So too then has the money received by the businesses, the carpenters, the car dealers, etc.

Not a bust, but a major slow down. It is a good thing the state has all that savings from the extra income from oil and agriculture this past decade.

Now, that all being said, the state is in a slowdown, but if you recall the last report by the OMB North Dakota government collections for its major taxes, after significant reductions by the legislature, is not slowing down. In fact collections are significantly greater than projected by the firm the state hires to tell them what to expect. It will take a major economic slowdown for the state not to have significantly more money than anticipated at the end of this biennium.

Given that places like Williston, Tioga, and Watford City actually are collecting less sales taxes than last year, but Dickinson is collecting more, and Fargo, as far from the oil patch as you can get, is collecting a lot more. No, more than a lot more.

Both Dickinson and Fargo are up about 17 percent from last year (for the first 6 months of 2014), and Fargo is over four times as large as Dickinson in terms of collections.

Finally, to my Grand Forks readers, I keep hearing how Grand Forks isn’t growing. I don’t know who is looking at what data to come up with that conclusion. Yes, it is slow compared to Fargo, but it is consistently ahead of last year in total, and in fact in every area. Some things like sales taxes are only up a few percent, but when we realize how our Canadian traffic, an important segment of the Grand Forks market, has slowed down because of their dollar when we look at the building, the employment, and other factors we need to be happy with Grand Forks economy. Grand Forks needs to keep two three letter words in mind: UND and UAV. While AGR is slowing down those two are increasing.

 

What can I say. Unbelievable! Flabbergasted! Can you believe this? Nothing in all the years I have been doing these statistics has ever approached what I present here.

I understood post flood. I even understood what was happening last year. But this, it is hard to believe. We know that the state is putting a lot of money into UND with the law school, the eating hall, and the medical school, but commercial spending for new buildings and for repairs/remodeling is down by three fourths that amount (about a $24 million decrease to a $32 million increase) and to date, only one-half the way through the year, Grand Forks is nearly 45 percent ahead of last year in building permit value. Remember, last year set a record by 50 percent compared to the next closest year.

The East Grand Forks data is not ready yet. I will present it when I can, but what I want to do is combine several of these charts I have done lately involving Grand Forks specifically in comparison to other cities in the state, and the upper northern plains where that is possible.

I mean things like this,city sales taxes, and job growth. What is causing things like this? What do people know that maybe we are not aware of.

It may be that Grand Forks is entering into an exciting economic time. Remember, economist talk about leading economic indicators. What could be a better indicators than investing in large scale capital items?

 

I find it interesting and frustrating when I hear news reporters talking or writing about employment. I suppose in fairness to them I have to admit it is difficult to talk about something as complicated as any sector of economics when the best most journalists have studied is one or two semesters of introductory economics. That is why most professional journals only hire writers who have studied, actually majored in the field they are writing about. That is an economic journal hires those who have studied economics and science journals are written by journalist with some kind of science major.

After all, I would have a difficult time writing about nuclear physics. Of course I wouldn’t try either, and sometimes such as when the government releases the monthly employment report that is “news” and people do want to know if unemployment increased or decreased over the past month.

So, I better be careful and not make any errors when discussing this report.

And here is the type of thing I am talking about. As we began to get deeper and deeper into this most recent economic contraction which society likes to call the Great Recession the increase in unemployment begin to slow down. Many begin to write that we were moving into a recovery. It took those who knew how unemployment counting works to point out that after people have been out of work long enough that they no longer could collect unemployment benefits many simply quit looking for work. Guess what? Those people are no longer officially unemployed. They are simply out there lost in the great statistical world. So, while the announced unemployment rate might have been reported as 9.8 percent the real rate when those no longer counted are included might have been greater than 12 percent, and those more than 2 percent additional were even more hungry than the 9.8 percent.

Beyond the personal problems of those who are not even receiving minimal help, we have to realize that makes the economic activity for the entire economy even worse than what is reported.

How much would take too much room to write about here. Just realize that because this recession has lasted longer than most it really meant that the problems were even greater and deeper than it has been in most recessions.

Of the four states I report on it is certainly Minnesota where this was the most important because it is by far the most industrial state of the four and has the largest percentage and numbers of people who moved into that nether land.

Another situation I would like to expand on is to discuss both the unemployment rate and the numbers of people employed. That is because most assume that if they hear that unemployment dropped a percent they think they can figure that out by comparing the difference in the two employment figures.

In fact, because of what I wrote about above and also because the employed figure changes can be influenced by both immigration and emigration. The history of North Dakota, especially over the past 20 years or so is a very good example of this.

North Dakota never has had a very high rate of unemployment over the past 40 to 50 years. It is not that as farming became more and more mechanized and there were not only fewer farmers but also fewer jobs in all those small towns around the state, and yet the state always had a relatively low unemployment rate. How come?

It is because unless there were severe losses of job opportunities around the nation that North Dakotans were told to move to where the jobs were, or at least should be. That was in other states. Especially Minnesota or Colorado, but even California, or Georgia, or Washington, or where ever the industrial growth was happening.

Now in the more recent past as the economy around the nation has changed the opposite has occurred. That is, North Dakota’s unemployment rate has improved, but really the percentage is not very much. For instance, we brag about it being the lowest in the nation at 2.4 percent in May of this year, but in May 2000 it was 2.6 percent. Of course in May 2010 it had increased to 3.3 percent before we really started to grow from the oil boom.

But this is what counts, from May 2000 to May 2014 the number of employed people in North Dakota had increased by nearly 20 percent. That is huge. That could come about only by people moving into the state.

Minnesota, which brags about having the lowest unemployment rate of any major MSA in Minneapolis/St. Paul barely increased the number of jobs over that same 14 year period by 5 percent.

South Dakota and Montana were both twice the percentage growth of Minnesota, but still barely over one-half of North Dakota. The United States was in the category of only about 40 percent of the growth compared of North Dakota.

All that being said, North Dakota still has the fewest number of employed people, and by quite a bit even compared to South Dakota.

So, which is the best state? Depends on your interpretation. Not so crowded in North Dakota. But not all the opportunities all around the state like Minnesota, or even South Dakota.

 

First, I have made three postings today. There is this report on North Dakota’s General Fund Revenues and Transfers. Below that is the Airline Boardings Report, and finally the most recent Employment/Unemployment report.

Concerning this report, second verse same as the first… Well, at least one thing that can be said about the projections purchased by the state is that they are consistent. That is, the same to be off by the same amount in each category every month.

At least that is the case with the amount they are off for the biennium to date. For a month to month comparison you would find some fairly with swings. For instance, with the individual income tax category they were short by about nine percent. That was blamed on people making the final adjustments on their 2013 income taxes. While that may be a valid reason it means that for the individual income taxes in North Dakota they were off by over 35 percent, and that is too much.

Incidentally, they were off by nearly that exact amount in the same time as the corporate income taxes. Also, in the insurance premium tax.

The worst category was the financial institutions tax. The projections
were off by 100 percent according to the OMB report. That hardly seems possible if any real economic effort was attempted.

Well, ignoring that waste of money, we can be happy that the report continues to very positive concerning North Dakota’s revenue. Even after the legislature’s attempt to cut taxes the state has collected nearly 20 percent more money to date than last biennium. We really are getting to a point where we need to consider some serious tax refunding to this state’s citizens.