GRAND FORKS, N.D. -- A recent Moody's Analytics report warns North Dakota could be headed for "full-blown recession," but a University of North Dakota economics professor dampened any dire predictions about the state's economy.
The report cites drops in oil prices and employment reductions outside of the state's metro areas as reasons it lists the state's business cycle as "at risk." The current estimated oil price in North Dakota is $27, the lowest since late 2008.
"The weight of the historic drop in oil prices has finally become too much for the North Dakota economy to bear," the Moody's report, signed by Senior Economist Dan White, reads. "The first full quarter of year-over-year job losses since the Great Recession has put the expansion at risk, and if losses continue through the end of the year, the state will be in full-blown recession."
The state's employment outside of the metro areas has dropped by about 14,000 jobs since the beginning of the year. But David Flynn, director of the Bureau of Business and Economic Research at UND, noted the rapid growth in employment North Dakota experienced during the Bakken oil boom leading up to this year.
"You had six years almost of year-over-year increases in employment," he said. "So you're due for that."
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Flynn added that a slowdown in the state's economy could be a good thing.
"We see all these stories about the stress that communities and the economy was going through in western North Dakota," Flynn said. "This is an opportunity to catch up."
Meanwhile, employment in the state's metro areas has grown by about 2,000 jobs since the start of the year, Moody's reported. The organization predicted North Dakota's largest cities will "take on greater importance ... as they welcome more displaced oil field workers and take advantage of the state's enviable fiscal position."
White cited the signing of an Iranian nuclear deal that allows the country to bring more oil to the market as one factor keeping prices low. Still, he doesn't expect the North Dakota's oil industry to go away.
"I think the pace of growth in the area is going to be much more restrained than it has been over the past several years, keeping in mind the last several years have been absolutely historic and extraordinary," White said.
Budget projections
The Moody's report comes before state lawmakers expect to receive a detailed budget projection from the group early next year, said Sen. Ray Holmberg, R-Grand Forks, the Senate Appropriations Committee chairman. He said state officials often ratchet back Moody's projections "just to be a little safer."
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Still, Holmberg noted it's difficult to predict what will happen with oil prices.
"A sinking of a ship in the Persian Gulf could make a big difference on what the price is the next day," Holmberg said. "They make the best educated guess they can."
Meanwhile, state tax revenues fell $40 million short of projections in November, making it "very likely" state agencies will see budget cuts, Office of Management and Budget Director Pam Sharp said last week. But Moody's cites the state's fiscal situation as one of its strengths, and Holmberg said North Dakota is in better shape than states whose general funds are more dependant on oil revenues.
Still, Holmberg expects building and infrastructure projects will be harder to fund in the next legislative session. If that's the case, he said, it's a good thing the Legislature funded projects like UND's new medical school during better times.
"It would be a pretty tough sell, I think, in the next session to do $124 million for a building," he said.
