ND Economy Scores Well in New Report

A new report released today from American Experiment North Dakota shows the state’s economic growth has slowed down since 2014 after a period of rapid growth that began in 2009, but that this headline number masks strong fundamentals which position the state well for future growth. While per capita gross domestic product was 7 percent lower in North Dakota in 2024 than it was in 2014, the state has the highest employment ratio in the United States, the fastest growing share of workers with at least a bachelor’s degree, and the second youngest workforce. 

The report utilizes use a technique known as “growth accounting” to break down the observed rate of change in real per capita GDP into the shares derived from changes in human capital, physical capital, and Total Factor Productivity (TFP) to identify the sources of North Dakota’s economic strength. The state saw a decline in the growth rate of human capital due to a decline in the average hours each North Dakotan worked annually. But the share of North Dakota’s workforce with at least a bachelor’s degree grew faster than anywhere else in 2014-2023 after being the only state to see a decline in 2008-2014.

“It’s no surprise that the volatility of the oil and gas industry directly impacts GDP growth and decline in North Dakota,” said John Phelan, economist at American Experiment North Dakota and author of the report. “The state is leading the nation in several important indicators and with wise policy, North Dakota is well positioned to do even better in the future.” 

Key findings from the report include:

  • What matters for economic well-being is income – or GDP – per capita and North Dakota’s recent performance is concerning. 
  • From 2009, North Dakota’s rate of per capita GDP growth surged, and by 2014 it was 41.3 percent above the level for the United States generally.
  • Since then, per capita GDP has fallen in North Dakota, and in 2024 it was 7.0 percent lower, in real terms, than in 2014. 
  • Of the 7.8 percentage point decline in the average annual growth rate of per capita GDP between 2008-2014 and 2014-2023, a decline in the per capita physical capital growth rate accounted for 45.7 percent (3.6 percentage points); Total Factor Productivity 35.8 percent (2.8 percentage points); and human capital 18.5 percent (1.5 percentage points).
  • The decline in the growth rate of human capital was entirely due to a decline in the average hours each North Dakotan worker works annually between the two subperiods. All the other sources of human capital saw improved performance.
  • The decline of the state’s employment ratio slowed as population growth slipped relative to employment growth.
  • The growth rate of skills derived from education per worker increased from the slowest rate in the 50 states to the fastest as the share of North Dakota’s workforce with at least a bachelor’s degree grew faster in North Dakota than anywhere else in 2014-2023 after being the only state to see a decline in 2008-2014.
  • Growth in skills from experience per worker was a source of relative strength, rising from the second fastest to the fastest rate between 2008-2014 and 2014-2023 as the state saw the share of its workforce in the peak years for skills derived from experience — 35 to 44 — increase at the fastest rate in the United States. 
  • The decline in the growth rate of physical capital was largely driven by a sharp decline in the growth of the Mining, Quarrying, and Oil and Gas Extraction/Mining and logging sector, falling 9.1 percentage points. 
  • The state had 67.7 percent of its civilian non-institutional population employed, the highest rate in the country. 
  • North Dakota ranks 17th out of 50 states for the level of human capital arising from education per worker. With only 35.0 percent of North Dakota’s workers having a bachelor’s degree or above even after the impressive growth of recent years, a share below 32 other states, this is an area where the state can look for faster growth.
  • With the second-largest share of its workforce under 45, this relatively youthful workforce will acquire skills with age and is an area where the state can expect to drive per capita GDP growth.
  • The state’s stock of physical capital per worker is the highest in the United States at $607,462 in 2023, largely a result of its extractives industries. There is no theoretical upper bound here, so North Dakota can hope to see a greater contribution to per capita GDP growth from this source. However, that will require a more friendly attitude towards the extractives industry from Washington, D.C.

A copy of the complete report can be accessed here: 

Accounting for Growth in North Dakota: Performance and prospects