A national banking official said he looks to North Dakota’s oil industry for clues about the health of the region’s economy.

“The Bakken, and North Dakota, is very interesting in giving me insight into what’s happening here and what it means for the broader economy,” Neel Kashkari said Thursday, May 16, while speaking at the Williston Basin Petroleum Conference in Bismarck.

Kashkari is president of the Federal Reserve Bank of Minneapolis, which serves North Dakota, South Dakota, Montana, Minnesota, as well as part of Wisconsin and Michigan. The Federal Reserve Banks are independent financial institutions that manage the U.S. economy.

In ordinary circumstances, when the economy is healthy, unemployment is low and the average rate of inflation is about 2%. However, if one of those factors is thrown out of whack, the Federal Reserve may decide to intervene.

“If the economy is growing too slowly, we will traditionally cut interest rates to try to give it a boost,” Kashkari said. “If the economy is overheating and inflation is too high, like recent experience, we will raise interest rates to try to tap the brakes in the economy to bring inflation back down.”

The Federal Reserve conducts extensive research to help inform those decisions, he said — including looking at employment trends in the Bakken.

“There have been times when the labor market here is incredibly tight, and it’s not been so tight around the U.S. economy, and you’re drawing in workers from all over America to come here — creating opportunity, high wages, and also challenges here in the local economy,” Kashkari said of North Dakota.

Recently, that hasn’t been the case, though. The whole country has had more jobs available than workers to fill them.

“If you have a particularly hot sector, you can’t simply draw workers from the rest of the country, because everyone around the rest of the country also has tight labor markets,” he said.

According to Kashkari, tribal economies are another important part of the Minneapolis Federal Reserve’s research. That’s because even when the U.S. economy is strong, tribes often face barriers that prevent them from accessing that wealth.

Their hope is to identify policies that governments can use to break down those barriers.

“Tribal economies have a unique set of challenges,” Kashkari said. “The economy may do well, different businesses may do well, and we still have people who are not participating in our economy.”

So where is the U.S. economy right now?

A mix of factors — including COVID-19, supply chain issues, an increased demand for consumer goods and Russia’s invasion of Ukraine — caused global inflation to surge in 2021, 2022 and 2023.

These days, however, the economy is doing pretty well, Kashkari said.

Nationwide unemployment is relatively low — it was under 4% as of the end of April, according to the U.S. Bureau of Labor Statistics. And while inflation is still rising more quickly than ideal at around 3.5%, it’s a far cry from its peak of 9% in late 2022.

Consumer spending is also strong.

“As much gloom as there appears to be when people are surveyed about how they feel about the economy, most people are spending like they feel pretty good about the economy,” he said. “If you go on airplanes, they’re usually full. If you go to restaurants, they’re usually full. If you go to a hotel, they’re usually busy.”

The housing market has been unexpectedly resilient, too, he said. It’s remained competitive even after a series of mortgage hikes by the Federal Reserve in 2022 and 2023.

The average rate for a 30-year fixed mortgage hovered around 3% before 2022, but is about 7.5% today.

“We think that there’s a pent-up demand for housing,” Kashkari said. “There’s been a pent-up shortage of housing across our economy for the last decade.”

The conference, which has more than 2,200 attendees, continues through Thursday.

This story was originally published on NorthDakotaMonitor.com