Unemployment Low in Some Rural Areas Due to Oil and Tourism

Filed under: Features,Labor,News,The Economy,Unemployment |

Rural America is starting look like a good place to do business and find a job.

For various reasons, many rural counties in the U.S. have unemployment rates drastically lower than many urban areas and the nation as a whole.

From the Daily Yonder:

Unemployment in rural America continued to edge down in August, staying below both the national average and the average for urban counties.

The unemployment rate in all rural counties dropped to 8.8% in August, from 9.1% in July.

In August 2010, the rural unemployment rate was 9.2%.

The urban unemployment rate was 9.2% in August of this year and in exurban counties, the rate was 8.5%. (Exurban counties belong to metropolitan statistical areas (MSAs), but have about half their population living in rural settings.)

More than 6 out of ten rural counties had August unemployment rates below the national average of 9.1%

There are five states with unemployment rates under 5 percent: South Dakota, New Hampshire, Massachusetts, Nebraska and North Dakota — states in the Great Plains or New England.

Read the original post.

New England’s low rural unemployment rate may be explained in part by tourism, which is a year-round industry in states such as Vermont, where the rural unemployment rate is 5.7%. Here’s a good explanation form a local newspaper:

From the Conway (N.H.) Daily Sun

Annette Nielsen, economist for the New Hampshire Economic and Labor Market Information Bureau in Concord, said the state of New Hampshire has traditionally had a low unemployment rate.

One of the reasons why New Hampshire and Vermont have the lowest unemployment rates among New England states could be due to seasonal tourism, Nielsen suggested.

….

Despite having a lower unemployment rate, Nielsen said traditionally people have not moved to New Hampshire for that reason, even during the recession. Some people come to New Hampshire to work seasonal jobs, but in general, she said, the salaries are lower than in Massachusetts and the opportunities for jobs in professional fields are few and far between.

With few forms of public transportation, especially in rural areas, people are required to have a vehicle, which adds more cost to daily living. And, she said, “Housing is not traditionally cheap.”

Not all New England shares the trait of low rule unemployment. Connecticut’s is 8.7%, Maine’s is 7.7%. Both are still blow the national rate but still high compared to thrill neighbor states that have accessible year-round tourist draws.

Two of the five states with low rural unemployment, South Dakota and North Dakota, are undergoing oil drilling booms thanks to the practice of fracking, in which pressurized water and steam are forced underground to force oil and gas to the surface.

Wyoming, which has a small population, has a rural unemployment rate of 5.3% and a statewide rate of 5.5%, is also part of the Great Basin oil boom. Montana, where oil exploration is also taking place, seems to not have benefitted as much as its neighbors since it’s rural unemployment rate is 7.7%. New Mexico, another oil boom state, has a rural unemployment rate of 6.6%, low by current national standards.

North Dakota has an unemployment rate of just 3.3% — less than a third of the national rate of 9.1%, and about a quarter of Nevada’s worst-in-the-nation 12.9 %. North Dakota had nation’s lowest or was tied for the lowest unemployment rate every month since July 2008. Payrolls in the state grown year-over-year by 5.2%. Texas came in second, with an increase of 2.6%.

However, oil doesn’t explain all of North Dakota’s apparent economic and success. North Dakota produces half as much oil as Alaska but had about the same size population. Yet, Alaska’s unemployment rate is about 7.7%.

Part of the reason for North Dakota’s economic miracle is a bit of socialistic banking: The Bank of North Dakota.

From the Bank of North Dakota website:

Bank of North Dakota History

Bank of North Dakota original headquarters.
Bank of North Dakota original headquarters.

During the early 1900’s, North Dakota’s economy was based on agriculture. Serious in-state problems prevented cohesive efforts in buying and selling crops and financing farm operations. Grain dealers outside the state suppressed grain prices; farm suppliers increased their prices; and interest rates on farm loans climbed.

By 1919, popular consensus wanted state ownership and control of marketing and credit agencies. Thus, the state legislature established Bank of North Dakota and the North Dakota Mill and Elevator Association.

Bank of North Dakota (BND) was charged with the mission of “promoting agriculture, commerce and industry” in North Dakota. It was never intended for BND to compete with or replace existing banks. Instead, Bank of North Dakota was created to partner with other financial institutions and assist them in meeting the needs of the citizens of North Dakota.

BND opened July 28, 1919, with $2 million of capital. Over the years, our fiscal responsibilities to the state haveBank of North Dakota new building increased dramatically. Today, the Bank operates with more than $270 million in capital. The State of North Dakota began using bank profits in 1945 when money was first transferred into the General Fund. Since that time, capital transfers have become the norm to augment state revenues.

Commercial, farm and secondary market real estate programs were established to benefit state residents and the local financial institutions who serve them. BND’s federal funds program provides an alternative funding source for banks to access additional capital for consumer loans.

In 1967, Bank of North Dakota made the first federally insured student loan in the nation. The Bank continues to provide a variety of loans for students and their families wanting to pursue post-secondary education.

In partnership with more than 100 other North Dakota financial institutions, Bank of North Dakota continues to meet and expand its 90-plus year mission to promote the development of agriculture, commerce and industry in North Dakota.

From Yes! Magazine:

Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state. In 2010, according to the BND’s annual report:

The Bank provided Secured and Unsecured Federal Fund Lines to 95 financial institutions with combined lines of over $318 million for 2010. Federal Fund sales averaged over $13 million per day, peaking at $36 million in June.

Over a 15-year period the BND has contributed more to the state budget than oil taxes have.
The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services. In 2010, according to the BND annual report:

The need for Flex PACE funding was substantial, growing by 62 percent to help finance essential community services as energy development spiked in western North Dakota. Commercial bank participation loans grew to 64 percent of the entire $1.022 billion portfolio.

The BND’s revenues have also been a major boost to the state budget. It has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. According to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did (oil and gas revenues added $71 million while the Bank of North Dakota returned $60 million). Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.

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