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North Dakota and US Recession

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Summary:
This seems to be a question on the minds of many these days, and with the disaster that is the current state of fiscal policy it is not a surprise. Yes, I am leaving out monetary policy for now and we can discuss the merits of that in a later post. North Dakota is a state in the cross hairs of some current US policy choices, notably the current trade conflict with China. The inconsistency of messaging is an issue on its own preventing all economic agents, farmers, traders, and Chinese negotiators, from knowing the proper decisions going forward. There is always uncertainty in economic decisions, but the uncertainty present in current US policy stances and actions is a new and arguably is the first instance of this coming from the US in the lifetime of many farmers. Since

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This seems to be a question on the minds of many these days, and with the disaster that is the current state of fiscal policy it is not a surprise. Yes, I am leaving out monetary policy for now and we can discuss the merits of that in a later post.

North Dakota is a state in the cross hairs of some current US policy choices, notably the current trade conflict with China. The inconsistency of messaging is an issue on its own preventing all economic agents, farmers, traders, and Chinese negotiators, from knowing the proper decisions going forward. There is always uncertainty in economic decisions, but the uncertainty present in current US policy stances and actions is a new and arguably is the first instance of this coming from the US in the lifetime of many farmers.

Since 1980 the National Bureau of Economic Research identified five different recessions in the United States. These went from January of 1980 to July of 1980, July 1981 to November 1982, July 1990 to March 1991, March 2001 to November 2001, and December 2007 to June 2009. These are based on assessments and judgements for US data. Why do I bring these up?

With the yield curve inversion recently occurring there is a great deal of concern about an oncoming recession. So in this post let’s just ask how North Dakota did during these recessions. I will look at the growth in total personal income (nominal) in North Dakota over these time frames. The personal income data is quarterly frequency so I will just look at the quarter of the peak and trough listed in the previous paragraph. Obviously some of these are very short in duration.

The 1980s

In the January 1980 to July 1980 recession North Dakota total personal income declined by just over 6%, a sizable decline in a short time. Now this is a short time so it is difficult at times to really assign causes and issues in such a short recession. The next one was longer.

In the July 1981 to November 1982 recession North Dakota total personal income increased by over 18%, clearly taking its own direction compared to the national picture.

This highlights the compositional issues with economic change calculations. The nation as a whole is a much more diversified economy and there are sectors that can impact the nation negatively but not North Dakota because they are (largely) absent in the state’s economy.

The 1990s

In the 1990s recession North Dakota was again impacted negatively. However this was another short recession and it was a small effect. The impact was a decline of around 0.6%.

While still recessions the short duration recessions appear more like a pause or a minor reset of economic events, not a larger structural issue in the economy.

The 2000s

Before we look at the numbers let’s realize that these were bigger events that impacted the nation in dramatic fashion. There was a great deal of negative news in 2001, both economic, politic, and otherwise. And of course the 2007-2009 recession was given the title the Great Recession and was a major financial market issue.

North Dakota in the first recession of the decade North Dakota gained 0.8% in total personal income over the course of the recession. Again, the specific mix of economic activity in North Dakota was a help in avoiding the issues.

In the Great Recession North Dakota experienced a 6.6% increase in total personal income, completely avoiding the national experience and trend. Employment metrics were excellent too. This of course was the time of the rise of oil.

The Takeaway

It is not possible to make real conclusions at this point but it is pretty clear that national recessions do not automatically imply bad economic outcomes in North Dakota. However, this time might seem a bit different. If we are led into recession on the heels of a trade war impacting agriculture and other commodities such as oil it is more difficult to see how North Dakota avoids at least some of the negative effects. Those are sectors that provided insulation in the past when issues were in manufacturing or financial services.

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