Upper Midwest states defy national unemployment trends

Like us on Facebook

Indeed, consider that some of the states with the highest jobless percentages -- Nevada, California, Florida -- were hammered by undisciplined mortgage lending and the subsequent plunge in house prices, which led to hundreds of thousands of job losses in construction, financial services, and many ancillary industries.

Goss points out that banks in the northern Midwest, particularly the smaller community banks, adhere to very conservative lending practices -- which protected them from the excesses of the subprime mortgage circus.

"After the farm crisis of the 1980s, these banks became even more committed to very tight lending policies," he said.

"But also on the other end, perhaps as a reflection of their cautious, judicious personalities, the people of the region would prefer to enter into a traditional 30-year mortgage for a house, rather than something more risky."

Moreover, unlike, say, Michigan and Ohio, the economy in the upper Midwest is largely dependent on non-durable industries; or to durables that are not so sensitive to business cycles.

Looking at each of these fortunate states individually, North Dakota is not only flourishing from an ongoing energy boom -- in the past year, the number of oil drilling rigs has tripled -- but it also boasts pretty strong agriculture and food processing sectors.

As a comparison, consider that only about 1.2 percent of the labor force of North Dakota has been jobless for fifteen weeks or longer; while for the nation as a whole, that figure is at 5.6 percent.

South Dakota has a robust services sector -- including retail, health care, and credit card processing/transaction firms -- as well as a still-sturdy agriculture complex and government-connected entities like the huge Ellsworth Air Force Base. These industries have not been as hurt by the recession as other businesses have.

Nebraska remains dominated by agriculture; however the Cornhusker State also benefits from vibrant manufacturing, insurance, freight transport, telecommunications and IT companies as well.
(And having multi-billionaire Warren Buffet as a full-time resident doesn't hurt either).

"During the present downturn, these northern plains states have been insulated from the mortgage/housing woes that have impacted much of the rest of the country," said Stephen Bronars, senior economist at Welch Consulting, a labor & employment consultancy in Washington D.C.

"The Dakotas and Nebraska didn't enjoy the big run-up in real estate values prior to the housing crash, but, on the other hand, neither did they suffer from plummeting home prices after the crash. This speaks to how relatively stable and conservatively-run these northern Midwestern states are."

In addition, Bronars stated, these states have a mobile, adaptable, well-educated workforce.

"When jobs disappear, these Midwesterners are prone to move out of the area in search of work opportunities elsewhere -- this also keeps the jobless numbers low," he noted.
"Once you leave a state, you're no longer on the unemployment rolls"

Indeed, the Dakotas and Nebraska are principally rural, sparsely populated areas.

Bronars indicates that North Dakota's population has remained unchanged (at about 650,000) for the past three decades, and South Dakota's population has grown by only about half the national average -- attesting to the higher level of out-migration (especially by young people) from these states.

"A place like North Dakota is not for everyone," he said. "If things don't work out, people will simply relocate."

However, Randolph L Cantrell, rural sociologist at the University of Nebraska in Lincoln, points out that in some ways the low jobless rates are merely a statistical artifact, reflecting the culture and society of the region, as well as the behavior of its people.

"We have here the nation's highest incidences of multiple job-holding and self-employment and this really skews the jobless numbers downward," he said.
"If I'm a contract-laborer with three jobs and I lose two of those contracts, I'm still considered employed since I still have my job as a self-employed contractor."

In fact, Cantrell indicates that in some Nebraska counties the number of entrepreneurial so-called 'non-farm proprietors' actually exceeds the number of wage/salary workers.

Thus, while farm-owners and farm laborers are excluded from the government's jobs data -- hence the 'non-farm' payroll moniker -- rural areas proliferate with workers and companies that provide a plethora of services to the farms (and these workers -- whether they be self-employed or wage laborers -- are counted in the jobs data).

"If you lose your job in an office or factory and go help out at your family farm, you are not counted as among the jobless," Cantrell added.
Bronars cautions that employment is only one measure of how strong a regional economy is, so it should be viewed in context.

"In a dynamic economy, one may witness rapidly changing fundamentals, which can lead to massive hirings (on the upside) or big job losses (on the downside)," he said.
"But in states like the Dakotas, you don't see such fluctuations since they're somewhat insulated from the national economy. The amplitude of economic changes is much more modest here."

The combined population of North Dakota, South Dakota and Nebraska – about 3.2-million – is spread out over a land mass roughly the size of France. Thus, it's a rather unique area will little in common with the more densely populated, more urbanized areas like Southern California or the northeastern Metropolis. Certainly, the economies of Bismarck, North Dakota or Platte, Nebraska cannot be compared with Los Angeles or New York City in any way – however, one must still marvel at how these sturdy northern regions have managed to keep most everyone working regardless of broader economic trends.