Accounting for Growth: North Dakota’s high employment rates

Performance

Yesterday, we saw that the average annual growth rate of North Dakota’s employment ratio went from being the seventh best ranked in 2008-2014 to 49th in 2014-2023.

Changes in the employment ratio are a function of changes in the population and the number employed. If the number of people employed (the numerator) increases/decreases faster than the number of people in the population (the denominator), the employment ratio (the sum) — which is employment divided by population — will rise/fall. For the employment ratio to increase, we need employment growth to outpace population growth.

In 2008-2014, North Dakota had the second fastest average annual rate of employment growth in the United States after Texas, 1.7%, but it had an even higher rate of population growth, the fastest in the United States at 2.1%, so its employment ratio fell. As Figure 1 shows, in 2008-2014, the 0.4 percentage point gap between population growth and employment growth was the seventh best performance in the United States and the driver of that seventh-place ranking.

Figure 1: Average Annual Rate of Employment Ratio Growth

In 2014-2023, however, North Dakota’s average annual rate of employment growth fell to 0.3%, 43rd out of 50 states, while it picked up for others: the average across the 50 states went from 0.1% in 2008-2014 to 1.0% in 2014-2023. Meanwhile, the state’s population growth rate also fell to 0.6%, which ranked 17th. The 0.3 percentage point gap between population growth and employment growth, shown in Figure 1, ranked 49th and drove North Dakota’s ranking of 49th, which we saw yesterday.

The story of North Dakota’s employment ratio is, then, one of relatively impressive population growth across both subperiods, with marginally, a relatively better performance in job growth in 2014-2023.

Prospects

What potential is there to drive faster per capita GDP growth from this source in North Dakota?

One source of per capita GDP growth is an increase in the share of the population employed. If there are more people working to produce goods and services — GDP — we will have more to divide by the population for our per capita calculation. Here, North Dakota is doing better than any other state in America. As Figure 2 shows, in 2024 the state had 67.7% of its civilian non-institutional population employed, the highest rate in the country. While there is scope for a state like West Virginia to drive faster per capita GDP growth from a higher employment ratio, there is much less scope in North Dakota.

Figure 2: Employment as a Share of the Civilian Non-Institutional Population, 2024

There is an upper limit to how much per capita GDP growth can be derived from increasing the employment ratio: once everybody is employed, there can be no further growth. Ultimately, economic growth from human capital comes from the skills the workers possess, the productivity of which, driven by technological progress, has no upper limit. This “knowledge capital” can come from either education or experience.

This article is based on our report “Accounting for Growth in North Dakota: Performance and Prospects.”