Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 December 7, Economic Forecast OUTPUT AND EMPLOYMENT 7 9 United States Real GDP $ billions (fourth quarter) $, $,97 $, $7, $7,7 $, $,9 $9, % change over the four quarters.%.%.%.%.%.%.%.% Nonfarm employment Job count (fourth quarter),,7,79,,,9,77,,9,,,7,,9 7,7, % change over the four quarters.%.7%.%.%.%.%.%.% Average monthly change,,,,,,,, North Dakota Real GDP $ billions (fourth quarter) $9 $ $ $7 $ $ $7 $ % change over the four quarters.%.%.7% 7.%.%.%.%.% Nonfarm employment Job count (fourth quarter) 7,7, 7,97 9,7 9,9,,797, % change over the four quarters 7.%.9%.%.9%.7%.%.%.% Average monthly change,,9,9,9,9,79,, WHAT THE TABLE SHOWS: North Dakota s GDP forecast is derived from the national forecast by allocating output to each of the states based on employment shares. Forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. The state s economy is soaring as it develops the Bakken shale gas and oil field. North Dakota s economy is forecast to continue to expand at a fast pace. The broadening of the state s economy built on its energy assets is expected to sustain the state s supercharged growth pace for the next half decade. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor. Regional Perspectives: North Dakota Economic Outlook Commercial Banking

3 Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government December 7, The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance of selected industries to the state s economy with the national footprint of each industry US industry mix North Dakota industry mix (state and national figures reflect the value added of each industry as a percent of aggregate state or US nominal GDP, respectively). The agriculture and government (defense) sectors account for a much larger share of the region s GDP compared with those industry s share of the national economy. Dependence on health care and government activity is also a source of stability. The strength of the agriculture and energy sectors are a plus for North Dakota. Source: US Department of Commerce. Updated through. Regional Perspectives: North Dakota Economic Outlook Commercial Banking

4 December 7, Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy 9 7 Business bankruptcy filings Nonbusiness bankruptcy filings 9 7 filings by businesses and persons relative to the number of filings in 7 Q, prior to the recession. The number of bankruptcy filings is negligible. All US bankruptcy filings (shaded area) Indicators of financial stress are a useful coincident indication of economic distress. The state s business community remains vibrant. Source: Administrative Office of the U.S. Courts; Updated through September Regional Perspectives: North Dakota Economic Outlook Commercial Banking

5 December 7, Oil & Gas Activity NUMBER OF DRILLING RIGS ON LAND, INLAND WATERS, AND OFFSHORE, The illustration identifies trends in the Baker Hughes rig count.,, United States (left scale) North Dakota (right scale) 7 Drilling activity continues to surge, providing the key spur to the state s economic boom. Robust demand for energy is an important cushion for North Dakota., Source: Baker Hughes rig count. Updated through Q., Regional Perspectives: North Dakota Economic Outlook Commercial Banking

6 December 7, Private Business Surveys REAL GDP (% CHANGE MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) Real GDP in the Great Lakes region (left scale) Forecast - Business Barometer Index, Mid-America Purchasing - Managers (right scale) The figure features a survey of purchasing managers in the Midwest and real GDP growth in the Great Lakes area. Business activity in the Midwest has moderated but this has little impact on North Dakota s economy. Diffusion indexes, like those based on responses from purchasing managers, are a timely indicator of activity in the state and these may be moderating. Business surveys point to slightly subdued activity compared with the early years of the recovery. Note: Business Barometer data unavailable prior to 997. Sources: Institute of Supply Management; US Department of Commerce. Updated through Q (survey) and Q (GDP). Regional Perspectives: North Dakota Economic Outlook Commercial Banking

7 December 7, Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL North Dakota US (solid area) The figure tracks layoffs in North Dakota and the national level of claims. Weekly layoffs, both the state and national tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession. Layoffs are up slightly this year. The state has the wind at its back. Source: US Department of Labor. Updated through November, (state) and November, (US). Regional Perspectives: North Dakota Economic Outlook Commercial Banking 7

8 December 7, Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) North Dakota US Forecast Real GDP growth in North Dakota (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). The state s economy remains strong, swimming against the national tide. The strength of the agricultural and energy sectors is expected to power North Dakota s economy in. Development of the state s energy assets is expected to sustain rapid growth for a while. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: North Dakota Economic Outlook Commercial Banking

9 December 7, Economic Output REAL GDP LEVEL (RATIO TO Q) The figure illustrates the evolution of real.. GDP of the state and the overall US economy since the fourth quarter of, the peak of the previous business cycle. North Dakota. that is, at any point in time the lines trace the ratio of real GDP to its level in Q. The state s economy has doubled in size over the most recent years even as the. Forecast. national economy has expanded only percent in that time.. US... North Dakota was untouched by the national recession and now is expanding rapidly Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: North Dakota Economic Outlook Commercial Banking 9

10 December 7, Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM MONTHS EARLIER) North Dakota s employment trend, compared with the nation s. 9 North Dakota US Forecast 9 Employment is booming. 7 7 Employment is expected to continue to grow at a robust pace. Source: US Department of Labor. Updated through October Regional Perspectives: North Dakota Economic Outlook Commercial Banking

11 December 7, Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) The figure illustrates the evolution of.... employment in the state compared with the nation since Q, the peak of the previous business cycle. The lines trace out.... North Dakota US Forecast.... the ratio of employment at the time to employment in Q. North Dakota s employment base stands percent above the level a decade ago North Dakota stands apart from most regions. Source: US Department of Labor. Updated through October Regional Perspectives: North Dakota Economic Outlook Commercial Banking

12 December 7, Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Job trends in local communities within the US forecast US state. The strength in the state s economy is fairly diverse..... Bismarck North Dakota enjoys unprecedented growth... Forecast.. Fargo Source: US Department of Labor. Updated through April..... Grand Forks North Dakota forecast North Dakota Regional Perspectives: North Dakota Economic Outlook Commercial Banking

13 December 7, Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) Unemployment rate trends in North Dakota, compared with the national average. Unemployment is negligible in the state. North Dakota US (shaded) Forecast The unemployment rate is the single best indicator of the relative economic performance of a region. Economic activity is robust, judging by unemployment trends. Source: US Department of Labor. Updated through October Regional Perspectives: North Dakota Economic Outlook Commercial Banking

14 December 7, Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (99 Q =.) The figure tracks the relative price of houses in the state versus the nation that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 99. A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade. The state s energy boom is lifting real estate values North Dakota is not plagued by the housing excesses that were common to the south and the west. Source: FHFA. Updated through Q. Regional Perspectives: North Dakota Economic Outlook Commercial Banking

15 December 7, Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 99 Q LEVEL) The figure tracks the cumulative percentage.. deviation in house prices since 99 in selected local markets and compares those. US Grand Forks. with the national average. Real estate values are marching to a Bismarck different drummer in North Dakota..7.7 KEY MESSAGE:.. Trends across the state are similar. Source: FHFA. Updated through Q Regional Perspectives: North Dakota Economic Outlook Commercial Banking

16 December 7, New Home Building HOUSING STARTS (RATIO TO THE JULY 99 LEVEL) 9 7 US North Dakota Forecast The pace of new home building (housing starts) in North Dakota, compared with the national trends. Naturally, home building activity is booming. The housing outlook is quite favorable in North Dakota. Source: Census Department. Updated through August. Regional Perspectives: North Dakota Economic Outlook Commercial Banking

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