The Geography of Jobs: Smart Policies Are Good, but Oil Is Better

How Texas and North Dakota won the recovery

If you want to understand how to create jobs -- not just a few at a time, but hundreds of thousands at once -- look to Texas and North Dakota.

Together, these two states account for a little more than 8 percent of the country's population -- about one in 12 people. But they're also responsible for 20 percent of net new jobs since the end of the recession. And, crucially, they account for "more than 100 percent of the increase in U.S. [oil] production since 2009," James Hamilton writes.

The Great Plains have been relatively great throughout the recovery for many reasons -- cheaper land, cheap wages, service sectors insulated from the housing-finance crisis that leveled parts of California, Florida, Arizona, and Nevada -- but energy has helped a lot. It's "not entirely a coincidence," Hamilton wrote, that "the middle of the United States [has] been most successful in terms of connecting workers with jobs."

Is it possible that the Great Plains simply have better zoning laws, better governors, better entrepreneurial incentives, better schools, and better [other things that you typically associate with growth]? Yes, it is possible that the entire central time zone is magically gifted at matching people and jobs. It's also really, really unlikely. More likely is that the Great Plains have some of the positive aforementioned qualities -- Houston's zoning policies are exemplary, e.g. -- but most importantly, they did well because many of them shared something in common at the trans-state level: bountiful energy resources under their feet.

Take the five or so states with fastest-growing oil production -- ND, TX, OK, CO, NM -- and draw their post-crash job performance against the rest of the country. This is the picture you get. Except for New Mexico, the four top oil-growth states fell lower and have climbed higher than the rest of the country.

The oil and gas revolution isn't just a nice thing for the miners and drillers. The benefits are broadly shared. When the Bureau of Labor Statistics looked at employment and wages in the Bakken Formation -- the oil-rich shale under parts of North Dakota and Montana -- it found that richer miners created more work in construction, transportation, and warehousing. Other industries accounted for another third of all new jobs. A oil boom is a wide and generous thing.

In the absence of a national jobs policy, what we have instead are state policies looking over each other's shoulders, trying to figure out who's doing it right. It's quite hard to argue that Texas and North Dakota are doing it wrong. But it's also hard to argue that they, and similar states, are not the beneficiaries of considerable topographical fortune. And so are their workers.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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