The Jobs From The North Dakota “Oil Miracle” Have Disappeared

Back in 2012, liberal New York Times columnist Paul Krugman and conservative Wall Street Journal columnist Stephen Moore got into a debate about the role of oil drilling in promoting job growth. In a column titled “What North Dakota Could Teach California”, Moore first posited that North Dakota’s oil boom had led to strong job growth in the state, then went on to argue that California and the U.S. more generally could experience similar growth if they were to loosen up on environmental regulations.

Krugman responded with four blog posts and one news article over the course of the next week. He noted two big flaws with Moore’s argument: first, that most states don’t have nearly as much oil as North Dakota, and therefore cannot hope to experience similar job gains from oil drilling; and second, that adding 15,000 jobs may make a big impact on small states like North Dakota, but the same number of jobs has little impact on states like California and Pennsylvania.

And thanks to hindsight, we can now say that Moore was wrong for a third and even bigger reason: North Dakota’s job market began tanking right after Moore wrote his column.

Between July 2009 and July 2012, North Dakota added over 19,000 mining & logging jobs; over the next two-and-a-quarter years, it added less than 6,000. Total employment in the sector peaked at 31,500 jobs in October 2014, then fell all the way to 19,300 as of this past August.

This has been a huge gut-punch to the state’s economy. In the years immediately following the Great Recession, North Dakota was experiencing as strong a recovery as any state in the country. Its prime-age employment rate (the percentage of 25-54 year-olds with a job) fell from 87.9% in 2006 to 85.9% in 2009, then rose all the way back to 87.6% by 2011 as a result of the oil boom. But as the boom went bust, North Dakota’s prime-age employment rate began falling; the state’s prime-age employment rate in 2016 (84.4%) was fully 3.5 percentage-points lower than its 2006 rate:

Contrast that with what has happened elsewhere in the country. Since 2011, the national prime-age employment rate has risen 2.8 percentage-points, making up for about three-fifths of the jobs that were lost during the recession:

In his column, Moore said that President Obama should come out to North Dakota so that he could learn how to create jobs. But clearly it’s Stephen Moore, not Barack Obama, who could use some schooling on job creation. Between 2006 and 2011, North Dakota’s labor market outperformed the national labor market; between 2011 and 2016, the reverse was true. But taken as a whole, the past decade has been far worse for the state favored by Moore than for the country led by Obama. Between 2006 and 2016, North Dakota’s prime-age employment rate fell 3.5 percentage-points; the national rate declined by 1.9 percentage-points, only about half as much. This can be seen in the bar graph below.

Finally, there is one last point worth noting. Back in 2009, one of the main Republican objections to President Obama’s stimulus package was that it would create “work” rather than “jobs”. The distinction, according to Michael Steele (then the chair of the Republican National Committee), was that “work” is temporary, whereas “jobs” are permanent:

The idea that we shouldn’t help workers through non-permanent bouts of joblessness is somewhat callous. (Hey, what’s 40 weeks of unemployment between friends?) But set that issue aside for now. Think about what the Republican view on Obama’s stimulus package means in the context of the North Dakota oil boom. That boom proved to be temporary, and in recent years, many of those oil jobs have disappeared.

The North Dakota oil boom may have created work, but it apparently didn’t create jobs.