What's North Dakota Doing Right?

As most states struggle with budget deficits and soaring unemployment, North Dakota has a huge surplus, and Bismarck has the lowest jobless rate in the nation

By Rebecca Reisner

Editor's Note: This story has been updated to reflect the Sept. 2 announcement by Bobcat Co. that it will close its Bismarck plant.

At Minervas Restaurant & Bar in Bismarck, N.D., the only patrons bartender Trent Mock hears complain about unemployment are out-of-state visitors staying at the adjacent hotel. "People from Bismarck are pretty relaxed," Mock says. "They're not worried, not at all." There's a reason: At 3.6%, Bismarck's unemployment rate is the lowest in the nation, according to the Bureau of Labor Statistics.

Blessed with a diversified economy, the city of some 60,000 residents on the east bank of the Missouri River has remained largely unmarred by the global financial crisis, which has wrecked the U.S. housing industry, felled hundreds of banks of all sizes, and sent the national unemployment rate to nearly10%.

Right now, Bismarck residents have scant reason to worry. "Our employment situation is such that if one sector took a hit, another one could compensate for it," says Russell Staiger, director of the Bismarck-Mandan Development Assn., a private, not-for-profit economic development corporation that supports Bismarck and its smaller sister city across the river, Mandan.

health care looks to be poised for growth

As the state capital, Bismarck employs more than 12,600 government workers, up from 11,700 a year ago, according to June, 2009, figures from the Bureau of Labor Statistics. The city has four colleges—Bismarck State College, Mary University, United Tribes Technical College, and a small section of the University of North Dakota Medical School—and two major medical facilities. The city had a combined total of education and health-service employees of 11,100 as of June 2009, up from 10,800 in June 2009 and 8,000 a decade earlier. Most people think the local health-care industry in particular is pegged for growth. "North Dakota has an issue of small towns dying off, so for health care, people are coming to Bismarck," says Tom Gerhardt, a 33-year resident and news director at KXMB-TV, the local CBS (CBS) affiliate.

Of course, none of this optimism is to suggest that negative economic indicators don't lurk. On Sept. 2, Bobcat, North Dakota's largest manufacturing employer, said it would close its Bismarck plant and move 390 manufacturing jobs to an existing plant in Gwinner, N.D. by year's end. The plant—which makes small excavators and frame loaders for construction and landscaping—employs 620 residents. "It's on people's minds, but I wouldn't say they're panicky," Phil Davis, customer-service area manager for Job Service of North Dakota, which helps people find jobs, said in late August.

Staiger worries that entrepreneurs and corporate entities from other states will view the low unemployment rate as a reason to decide against opening up shop in Bismarck. "Unemployment rates of 3% or 4% or 5% give new businesses pause," says David Flynn, director of the Bureau of Business & Economic Research at the University of North Dakota in Grand Forks. "They don't think they'll be able to find enough employees." Roger Johnson, who served as North Dakota's Agricultural Commissioner from 1996 to 2009 and is now president of the National Farmers Union in Washington, D.C., believes revenue from the agricultural sector may contract a bit in the coming years because of an easing of the inflation that caused prices of farm products to rise. "If tomorrow commodity prices moved somehow, it could create problems," says Flynn, "and of course crops are always at risk until they get out of the field."

ideal conditions for wind power

But it's energy—vast, if hard-to-reach, oil and near-optimum conditions for wind-generated power—that holds the greatest promise for new job opportunities in Bismarck, Staiger says. "We're one of the best wind-turbine areas in the nation," he notes. "We have strong prevailing winds, and they're consistent." On 30,000 acres of land south of Minot, a city 110 miles north of Bismarck, construction began on Aug. 17 on the $250 million, 77-turbine PrairieWinds ND1 wind-farm project. The wind farm's developer, Basin Electric Power Cooperative, says it will be the largest such cooperatively owned project in the nation.

Another energy source, crude oil, is also a potential source of employment. The Bakken Formation, a geological phenomenon covering parts of North Dakota, Montana, and Saskatchewan, has an estimated 3 billion to 4 billion barrels of recoverable oil, only a tiny percentage of which has been tapped. The oil sits in subterranean rock formations that are particularly elusive given current technology. The oil industry already employs some Bismarck residents and could create thousands more jobs if scientists devise new technologies to reach Bakken's oil reserves.

Although there's little farmland in Bismarck proper, the city benefits greatly from having agricultural equipment dealers, livestock sales, and facilities to process dairy products. North Dakota is the country's largest producer of flax, sunflower seeds, and durum wheat, the principal component of pasta. Farmland covers 90% of the state, making North Dakota the most rural of all U.S. states.

the state has a $1 billion budget surplus

North Dakota has been spared the financial indignities that have plagued much of the country. The state finished its fiscal two-year cycle on June 30, 2009, with a $1 billion budget surplus; at least some of that windfall is likely to go toward creating more state-government jobs. And homeowners are enjoying lowered property taxes rather than foreclosures. "No low-documentation loans—'liar loans'—were given out in North Dakota," says Flynn at the University of North Dakota. "No metro community in North Dakota ever saw any more than 3% to 4% subprime loans." According to the real estate information site Zillow.com, the median list price for houses in Bismarck is $159,900, in contrast with the national $219,000.

Brian Peterson, proprietor of Knowles Jewelry, a 100-year-old retailer in downtown Bismarck, blames his store's flattening of sales on media reports about the national recession. "We've seen people tightening their belts," Peterson says. "I ask my customers: 'Have you lost your job? Has your interest rate gone up?' The answer is no. But consumer confidence is still hurt. I haven't laid anyone off, but I've put expansion plans on hold."

Rebecca Reisner is an editor at BusinessWeek.com .

The original article was available at http://www.businessweek.com/bwdaily/dnflash/content/aug2009/db20090830_943743.htm on October 3, 2009.