The NDSU Center for the Study of Public Choice and Private Enterprise found in a recent economic study that North Dakota is continuing to struggle with COVID-19, but future projections are better than previously expected.
“It does use trends in the data from the past to then project forward into the future. So the main takeaway from this edition is that if our economy were to be placed back into those past trends, our North Dakota economy would be situated to experience some economic growth,” the study’s author Jermey Jackson said.
Jackson is a professor at the NDSU department of agribusiness and applied economics and director for the Center for Public Choice and Private Enterprise.
The study was prepared by Jackson and examined wage growth, labor force participation, unemployment and the housing price index. The study used pre-pandemic data from the St. Louis Federal Reserve to forecast economic projections into the third quarter of 2021.
Because future projections are forecasted using pre-pandemic data, future economic projections heavily rely on a successful vaccine roll.
“ I think that we can be optimistic, but again, a lot does depend on us getting the vaccine ... I think it’s pretty critical,” Jackson said.
Total wages and salaries in North Dakota — most recently valued at $2.3 billion — are expected to continue declining into 2021.
The state’s labor force is also projected to decrease into 2021, with a slight recovery occurring after the first quarter of 2021, but not obtaining pre-COVID-19 levels, according to the study.
In quarter two of 2020, unemployment in the state peaked at 9 percent. Unemployment is projected to remain at approximately 5 percent throughout 2021.
“However, as the lower unemployment rate is reconciled with the corresponding decline in the labor force, it reveals a labor market that is continuing to struggle,” according to the study.
As a result of these factors, tax collection in the state is predicted to continue declining in 2021, although at a lower rate than what was projected in previous models, the study said.
Gross state product is also expected to recover after declining approximately 8 percent in quarter two of 2020.
“The North Dakota outlook shows signs of economic stagnation in the coming months. This includes minimal change in wages; declining labor force participation and total tax collections; and stagnation in the unemployment rate,” according to the study.
Economic forecasts were also made for Fargo, Bismarck and Grand Forks. Fargo is expected to slightly recover in the coming months, the study said.
Wages and labor force are projected to rise, as are housing prices slightly followed by a fall to current levels. Unemployment is also expected to fall in Fargo, which could be beneficial to Richland County residents and surrounding rural areas.
Jackson said that labor markets in Fargo and surrounding towns tend to be connected, as workers from surrounding towns commute to Fargo for work.
“So when the city of Fargo is doing well — and in the current forecast the city of Fargo is projected to do well — that should reflect for the rural communities that surround Fargo to also be doing well,” he said
Commodities like soy, wheat and corn are expected to experience a decline into 2021, according to the study’s projections.
“You can see those commodity outlooks and some of them don’t look great in the current report, but they have been trending up and so it’s got some predictions that they might come back down. But I wouldn’t put a lot of weight in that,” Jackson said.
The model has a large confidence interval, meaning the prices could vary substantially in the coming year. The model is also not well suited to predict commodity markets, Jackson said.
“I include them in the model precisely for the reason that they are exceptionally important for the North Dakota economy. And so anything that happens in those markets is going to have an impact (on the state),” he said.
Still, Jackson said anything could happen, particularly as vaccine rollout continues and the county and state’s futures remain uncertain with COVID-19.
“It’s a forecast, I don’t have a special crystal ball that tells us what the future will be,” he said. “If there’s anything that’s true, any forecast that I can make will be wrong. So that’s the only thing I really know for sure ... but it does tell us about these trends and I do think that the overall message is that if we can truly get back to the pre-pandemic world, things are moving in such a way that we should be able to restore ourselves to a position of being in economic growth.”