Personal income in Grand Forks catches up to national average

March 15--The oil boom and a few good years in the agriculture sector are making North Dakota wealthier.

But Grand Forks is only now catching up to the rest of the nation.

Grand Forks' per capita personal income, the largest share of which is typically wages and salaries, was consistently below the U.S. figure for nearly the past four decades. The same was true for North Dakota's other two largest population centers, Bismarck and Fargo.

But that changed after 2010.

Per capita personal income in the Grand Forks metropolitan statistical area, which includes Grand Forks and Polk counties, grew by 9.5 percent -- from $40,093 to $43,916 -- between 2011 and 2012, the fastest in the nation. Now, it's neck-and-neck with the rest of the country.

Business and public officials, as well as researchers, point to growing oil production keeping the demand for workers high and a strong agricultural economy in the Red River Valley in recent years as factors driving the growth in wages and personal income.

Still, the Grand Forks area is behind Fargo and Bismarck in both personal income and average weekly wages. Both of those areas have exceeded the U.S. average personal income of $45,188, while Grand Forks is slightly behind, according to the latest data from the U.S. Bureau of Economic Analysis.

North Dakota's per capita personal income was $54,871 in 2012, up from $34,588 in 2002, when adjusted for inflation.

"Obviously, North Dakota in general has been doing well," UND Economics Department Chairman David Flynn said. "(Grand Forks has) been doing relatively well in terms of the growth rate, but in any given year, we haven't necessarily done as well as other areas."

Wages

For the few decades leading up to the oil boom around 2008, personal incomes in North Dakota's three largest cities were behind the national average.

"I would think that has a lot to do with the fact that the cost of doing business in North Dakota was a bit lower than the rest of the nation," said Ryan Rauschenberger, the state's tax commissioner. But he added that the rapid influx of workers in the west is causing a housing shortage, bumping up rents and home prices.

"And that is having an upward pressure on wages, but that's a good sign of a strong economy," Rauschenberger said.

Personal incomes also include royalties from mineral rights ownership that have increased since the onset of the Bakken oil boom. It also counts rental income, which also has increased in the agriculture sector, said North Dakota State University agriculture economics professor Andy Swenson.

Employees of Grand Forks-based Advanced Engineering and Environmental Services, or AE2S, living in western North Dakota may receive a housing stipend to mitigate the high cost of living, said CEO Steve Burian. Those stipends, which are computed using the Grand Forks market as a baseline, are counted in employees' wages.

Regional differences

Average weekly wages in oil-producing counties are among the highest in the state. But places far away from the Oil Patch have seen wages increase as well. In Grand Forks County it increased from $660 in 2002, when adjusted for inflation, to $763 in the third quarter of 2013, according to Job Service North Dakota.

That's still below Cass and Burleigh counties, where average weekly wages in the third quarter of 2013 sat at $861 and $862, respectively.

Barry Wilfahrt, president and CEO of the Grand Forks-East Grand Forks Chamber of Commerce, said it wasn't necessarily a surprise that Grand Forks is behind. He said Bismarck is more influenced by wage increases in western North Dakota, and Fargo traditionally has been a higher-wage area.

Still, Burian said AE2S has been able to provide wage increases over the past few years based not only on market trends but also performance. He said the strong economy in North Dakota allowed them to avoid wage stagnation that occurred in other parts of the country.

"Compounded, we have seen some pretty significant increases in the last six years, and never had any pauses in that period," Burian said.

Kellee Fisk, chief people resource executive at Altru Health System, said they've seen competition across the board from other employers. But, she said they've been conservative in increasing wages.

"We've tried to be pretty steady," Fisk said.

An insurance policy

Flynn said recent rapid growth in personal incomes here may slow in the near future. He said it's simply a mathematical reality that as the income base expands, obtaining the same growth rates will require larger jumps in personal income.

But he also pointed to American Crystal Sugar [1]Co.'s announcement that sugar payments would drop from $68.41 per ton to $38 per ton as one example of a major industry experiencing challenges that could ripple throughout the market.

Swenson said the few years leading up to 2013 saw record commodity prices, but that's starting to turn around and is having a negative effect on net farm income.

For that reason, local business leaders say they want to establish a more diverse economy that's not as susceptible to swings in commodities or one particular industry. Attracting high-tech jobs that are anticipated to come with the burgeoning unmanned aerial systems industry in Grand Forks is one way to do that, Wilfahrt said.

"Any time you're tied to a commodity like oil or agriculture, your wages are going to be somewhat susceptible when the market goes up and down," Wilfahrt said. "The more diverse our economy is, it's almost like an insurance policy against one sector having a downturn."

___

(c)2014 the Grand Forks Herald (Grand Forks, N.D.)

Visit the Grand Forks Herald (Grand Forks, N.D.) at www.grandforksherald.com

Distributed by MCT Information Services