Hit to the extractives sector has crippled North Dakota’s economic recovery
Data from the Bureau of Economic Analysis (BEA) show that in 2023 North Dakota was one of just four states which had not at least regained its pre-COVID-19 level of Gross Domestic Product (GDP); the state’s economy was 1.9% smaller, in real terms, than it was in 2019. By contrast, all of North Dakota’s neighbors had economies bigger in 2023 than in 2019; Minnesota by 4.0%, South Dakota by 7.5%, and Montana by 9.7%, as Figure 1 shows.
Figure 1: Real Gross Domestic Product change, 2019 to 2023
To find out what is causing North Dakota’s relatively poor economic performance, we can break down these changes in GDP by sector.
In Figure 2 we see that the pattern of growth, or otherwise, in North Dakota’s economy between 2019 and 2023 has generally matched that of the economy of the United States more broadly. Eleven of the fifteen sectors have moved in the same direction, that is to say that they have grown/shrunk for both the United States and North Dakota. The four sectors where this is not the case are Utilities, Retail trade, Transportation and warehousing, and Finance, insurance, real estate, rental, and leasing. In each of these four categories, North Dakota’s economy has performed worse than the economy of the United States generally. Together, these four sectors accounted for 26.7% of North Dakota’s economy in 2019.
Figure 2: Real Gross Domestic Product change by sector, 2019 to 2023
But note, also, that North Dakota’s biggest decline in GDP from 2019 to 2023 — a contraction of 23.3% in real terms — came in the Mining, quarrying, and oil and gas extraction sector. In 2019, this sector accounted for 18.2% of North Dakota’s economy, the largest share in the United States, as Figure 3 shows; only West Virginia, Oklahoma, Alaska, and Wyoming also had shares above 10%.
Figure 3: Mining, quarrying, and oil and gas extraction share of GDP, 2019
Between 2019 and 2023, North Dakota saw the biggest sector of its economy — Mining, quarrying, and oil and gas extraction — take the biggest hit. Indeed, the contraction in this sector is nearly twice as large as the contraction in North Dakota’s economy overall.
There are two things to take from this: First, we need to identify the causes of this hit to the extractives sector in the United States and North Dakota specifically and fix them. Second, North Dakota’s policymakers need to look at what they can do in terms of state policy to get the economy back on track.