4 posts from August 2013

Higher ed enrollments leveled off last year in district states

As college students head back to school, administrators will have their clickers out taking head counts in hopes of keeping classrooms full, but not too full.

Statewide enrollment data are often not released publicly until the following summer (or, in some cases, at the request of the fedgazette). These data show that 2012 was a bit of an enrollment breather for colleges and universities throughout the district. Last year, undergraduate enrollments across public college and university systems fell in three of five district states (see Chart 1). Graduate enrollments also dropped last year in three states (see Chart 2).

Higher ed CH 1-2 -- 8-29-13

Despite the pause in growth, enrollments have grown significantly since 2008, particularly in the Dakotas and Montana. Enrollment growth is even more pronounced over the past decade; South Dakota, for example, has seen undergraduate and graduate enrollments increase about 20 percent since 2003. North Dakota’s graduate population is up by 54 percent over the same period.

Since the recession, 2-year schools have seen the strongest growth in many states, including Minnesota (see Chart 3). But that’s not the case everywhere. The 13 percent increase in students at North Dakota’s 2-year schools was outstripped by head counts for 4-year undergraduates (24 percent) and graduate students (20 percent).

Higher ed CH 3 -- 8-29-13

Two-year enrollments are also slipping in some states. Wisconsin saw 20 percent enrollment growth of full-time-equivalent students at its popular technical colleges from 2005 to 2010, topping 82,000. But FTE enrollment in 2011 dropped by 5 percent. (Fall 2012 figures were not available, according to system officials.) 

But nowhere are the numbers more bleak than for private career (or trade) schools (see Chart 3). These programs have been hard hit by the recession, comparatively high tuition and rising student loan levels (read more about these topics here). In Minnesota, enrollments in 2-year career schools peaked in 2009 at 36,700, only to fall by more than 11,000 students by the fall of last year.

William Thomas, fedgazette intern, contributed data for this article.

Bakken banks growing faster than peers in shale plays elsewhere

The Bakken energy boom in western North Dakota and eastern Montana has had a catapult effect on banks in the region, helping to fuel rising deposits, fast loan growth and growing profits. But the Bakken is only one of a handful of major, active shale plays across the country. How does the performance of Bakken banks compare with banks in other shale plays?

New research by the Federal Reserve Bank of Minneapolis measured bank performance among banks located inside and outside shale plays in the Bakken, Arkansas, Louisiana, Oklahoma, Pennsylvania and Texas. It found that Bakken banks saw significantly higher growth in deposits, construction and land development loans, and commercial and industrial loans, as well as an increase in profits compared with banks in other shale plays.

“While there are some points of similarity between the relative activity of Bakken banks and banks in other shale areas, the exceptional performance of Bakken banks has generally not been replicated in other shale areas,” noted bank authors Ron Feldman, executive vice president, and Stacy Jolly, financial analyst.

Among the more notable results (see also the accompanying charts at bottom):

• Deposits in Bakken banks increased 49 percent from 2010 to 2012. The next closest shale region was Louisiana, where bank deposits (in shale counties) rose 39 percent, but over a longer period (2008 to 2012).

• Construction and land development loans originating from Bakken banks almost doubled over the previous year ending in March 2013; over the previous three years, these loans grew by 165 percent to $209 million. Commercial and industrial loans within the Bakken saw a more modest rise (29 percent since the end of fourth quarter 2011), but that rate was still much higher than elsewhere. Owing in part to the Bakken’s rural nature and lack of population, residential loans were also higher as workers flocked to the region.

• Profitability of Bakken banks, as calculated by return on average assets, has been slightly higher and more consistent than banks in other shale regions, though banks in Pennsylvania’s Marcellus shale also have seen a persistent rise in profitability since 2009.

 Bakken banking 3 charts -- 8-20-13

For an extensive set of tabbed charts outlining bank performance in shale states, go the original research published online in the fedgazette.

County maps highlight the boom in the Bakken

The Minneapolis Fed’s Bakken Oil Boom web page features articles and data that describe the rapid expansion of economic activity in western North Dakota and eastern Montana. A recent addition to the site highlights changes in the region’s unemployment rates and employment growth rates during the boom relative to surrounding counties and to counties a few hundred miles away.

For example, in April 2004, just before horizontal drilling and hydraulic fracturing started to move into the area, unemployment rates in the Bakken already had relatively low unemployment rates (see counties in black outlines). The new online feature allows users to click through the maps and see how county unemployment rates have changed over time.

County maps Bakken 2013 (1) -- 8-13-13

After the recession ended in June 2009 and during the early part of the recovery, unemployment rates were relatively low in the Bakken area, while unemployment rates exceeded 7 percent in the western and eastern part of the Ninth District. Led by the Bakken region, North Dakota as a whole was an oasis of economic activity, while most other states were digging out of a hole. By April 2013, unemployment rates in most Bakken counties were below 3 percent.

While unemployment rates also decreased in other areas, the Bakken is unique in its concentration of low county unemployment rates. The exception in the Bakken is Roosevelt County, with an unemployment rate of almost 7 percent in April 2013. Roosevelt County has a lower share of oil production compared with many other Bakken counties and includes the Fort Peck Indian Reservation, which has relatively higher unemployment.

A similar story emerges with employment growth. In fourth quarter 2004, employment growth was mixed in the Bakken, with four of the 12 counties posting decreases. By fourth quarter 2010, employment in the Bakken was growing briskly in almost all of its counties, while employment levels were also decreasing in many areas outside the Bakken. Strong growth has continued in the Bakken through the fourth quarter of 2012. County maps of employment change over time are similarly available on the Bakken website (scroll toward the middle of the page).

Previous analysis by the fedgazette looked at the relationship between unemployment rates and wages in the Bakken relative to unemployment rates and wages in counties 100 miles to 400 miles away (see Bakken activity: How wide is the ripple effect?). Counties within 100 miles of the Bakken showed lower unemployment rates than those counties farther away, and counties within 100 miles to 200 miles of the Bakken saw higher unemployment than those within 100 miles, but lower unemployment than those beyond 300 miles.

See these trends by scrolling through the county maps. Since 2009, the counties directly surrounding the Bakken had relatively low unemployment rates, with the Bakken counties having the lowest rates. There is a similar pattern for employment growth in recent years, with relatively solid growth surrounding the oil patch but the strongest growth in Bakken counties.

Farmland still growing a bumper crop of dollars

It’s not exactly news that farmland values are rising. Prices have been on a tear for a decade now, and have even been covered in the fedgazette Roundup before. But just when you think farmland prices can’t go higher, they do, and price increases have been especially pronounced in the Ninth District.

According to an annual survey by the U.S. Department of Agriculture, released last week, the value of cropland nationwide increased 13 percent in 2013 from the previous year. The increase has been more dramatic around the district (see Chart 1). The USDA’s findings were consistent with the Minneapolis Fed’s most recent survey of ag lenders.

  Farmland Ch 1 -- 8-8-13

North and South Dakota saw the biggest increases among all states last year, at 42 percent and 30 percent, respectively. The big jump in North Dakota farmland prices is probably driven in part by the oil boom there. But price growth is primarily tied to high commodity prices and strong crop production as the Corn Belt pushes farther west.

Cash rents for cropland, which are directly connected to what can be produced on it, increased by 12 percent in each of the Dakotas and by 18 percent in Minnesota, compared with the 9 percent national average (see Chart 2). Average farmland prices are also lower in the Dakotas—about half the national average in South Dakota—so a dollar increase in these states also has a larger effect in percentage growth terms.

  Farmland Ch 2 -- 8-8-13

Nationwide, the value of farm real estate, including buildings and other land on farms, went up 9 percent. The slower pace of overall farm real estate growth compared with cropland suggests that crop production is a primary driver of price increases. In Wisconsin, where prices are near the national average and last summer’s drought had a bigger impact, both prices and rents saw a much lower rate of increase.

There are whispers of a bubble in farmland values—a disconnect between the market price of land and its fundamental production value. So it’s worth looking at the ratio of cropland prices to rents, a similar measure to the price/earnings ratios used for evaluating stocks (see Chart 3). Here the news is mixed.

Price/rent ratios are elevated relative to their levels 10 and 15 years ago, but they’ve come down nationwide (and in a few district states) since their run-up prior to the Great Recession. However, there was only a short-lived lull in this ratio in Minnesota and especially the Dakotas. It will be interesting to watch what happens to farmland rents and prices if crop prices continue to fall, as they are currently predicted to do.

Farmland Ch 3 -- 8-8-13