Presidential Podcast: Episode #11

On the latest episode of the UND Presidential Podcast, Interim President Joshua Wynne is joined by David Flynn, chair of the Department of Economics & Finance in the Nistler College of Business & Public Administration. The two talk about the economic fallout of the ongoing COVID-19 pandemic in North Dakota and the region, the challenges rocking the oil and gas industry as well as how coronavirus is impacting Census 2020.

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Prefer to read it instead? Here is the full transcript, which has been slightly edited for clarity:

Joshua Wynne: Hello, I’m UND President Joshua Wynne. Welcome to Episode Number 11 of the UND Presidential Podcast.

Thank you for joining me today. Given that most of us have been asked to work from home, we are practicing good Physical Distancing by recording this podcast over the online platform, Zoom.

The last several weeks have been particularly challenging for our community, our state, our nation and the world. I hope that wherever you might be listening from today, you are safe and healthy.

I want to thank UND’s students, staff, faculty and administrators for their deep commitment to the University and its unwavering mission to educate leaders in action. As we navigate these extraordinary times separately but together, the actions of everyone in our community have proven that we are One UND.

Thank you to our students who have quickly shifted to online learning. Thank you to our faculty who continue to educate and do research in these extraordinary days. Thank you to our staff who keep the offices of the University operational.

Thank you to our essential personnel who continue to work on campus and who take care of the students who cannot return home at this time.

Thank you to UND’s vice presidents, to the College and school deans and to all others in various leadership positions. Thank you for working tirelessly to keep UND open and serve our students, city and region.

Like the rest of the country, we now operate under the rules of so-called social distancing. Yet, social distancing means really physical distancing, not social isolation. The distinction is important. We need to stay together as a University community and a community within North Dakota.

Our commitment is to safety, first and foremost.

I also would like to issue a special Shout-Out for UND’s Angel Fund. We know that life can bring unexpected challenges. We never want a student to leave UND because of a situation that is beyond their control. The UND Angel Fund provides support for students so these challenges aren’t a barrier to completing their education.

The UND Angel Fund has provided financial assistance to students in time of crisis. A winter coat, new textbooks to replace those damaged in a fire, or a plane ticket to attend a funeral have all gone a long way for students in crisis.

By contacting the UND Student Affairs Office, our students can receive the help they need through the generous support of Alumni and friends like you.

Your kindness matters. Thank you for supporting students through the UND Angel Fund.
For more information on how you can get involved with the Angel Fund – please contact the UND Alumni Association & Foundation or go online at undalumni.org/angel.

I now want to introduce you to my special guest for this episode – Professor David Flynn. David is the chair of Department of Economics & Finance at the Nistler College of Business & Public Administration and a member of UND’s Institute of Policy & Business Analytics. Aside from teaching students, David regularly shares his expertise on the regional economy with reporters from around the country.
I’m really excited to have him here today to talk about the state of the economy in North Dakota amid the spreading coronavirus and downturn in global oil and gas markets. David, thank you for joining me.

David Flynn: Thank you very much for having me.

JW: Well, David, let’s start with the obvious. President Trump extended social distancing orders through the end of April, essentially adding a month to the initial estimates of how long social distancing might continue. So far, how have North Dakota businesses been coping – and going forward, what are the effects that we might see of this continued need to isolate?

DF: The situation in North Dakota is very similar to what we see happening in the nation as a whole. However, there are some important distinctions. When you look at the circumstances getting media attention, like New York City, and Seattle, these large metro areas, the population density there required more extreme measures to encourage or force social distancing that had larger impacts on business.
And while we’ve had impacts on business here in the state, there have been, I think, significant efforts to reduce hours versus outright furlough or outright terminate employees. It’s having an effect. It’s really going to be a matter of how much longer after the end of the month the social distancing recommendation from the federal government remains in effect.

JW: How will the $2 trillion — I say again, $2 trillion — of federal economic aid package help North Dakota residents and businesses?

DF: Certainly there are going to be important injections of financial resources into the North Dakota economy from this $2 trillion package. There will be paycheck protection users where businesses are able to make whole employees who had reduced pay. There will be businesses that can get other kinds of loans through this act.

And the financial support it provides will be vital to keeping the economic disruptions in the state to a minimum, at least as far as the COVID-19 impacts go.

JW: I’m still trying to get my arms around that figure of $2 trillion. Before the COVID-19 problem and the downturn in the economy. The gross domestic product of the United States was somewhere around $20 trillion-ish. So this this package is 10% of the prior GDP of the United States, more or less. Is that correct? And what are the implications of that?

DF: It is absolutely correct. It is an enormous injection of financial resources into the economy. The implications are more medium- to long-run, as we’ll start to have discussions about debt burdens and debt-to-GDP ratios, and how the government will find ways to pay back the incredible use of these resources that I think many would judge necessary in terms of what has to happen at this time. But there will be long and important discussions going forward about the state of the economy.

JW: A lot of Grand Forks residents naturally might compare the current circumstances to the Flood of 1997. How are those two unfortunate events different and how are they similar?

DF: So the flood in 1997 created very similar circumstances in the sense of an immediate distancing that impacted businesses. People were forced to close businesses; even those who could stay open had issues with employees having to take care of their family. And so there was a sudden, sharp interruption of business in Grand Forks.

One of the things that I believe Grand Forks understands maybe better and North Dakota through the Grand Forks experience understands better than other places in the country, is that there will be long adjustments that require a significant amount of planning, a significant amount of careful discussion by businesses about what their plans are going forward, how they can continue to stay in operation, because we’ll see potential changes in how people are working remote, working for some businesses may now be judged more viable, cost effective. They’ll just be significant changes as a result of this in all of American life, but Grand Forks has seen those kinds of longer-term changes in the business community already.

JW: So another question with a comparison. In 2009, there was the H1N1 – or swine flu – pandemic. From April 2009 to April 2010, the CDC estimated there were over 60 million cases in the United States, 274,304 hospitalizations, and over 10,000 deaths in the United States due to the H1N1 virus. What impact did the swine flu have on the economy back then? And does it compare in any way to what we are seeing today?

DF: So the interesting thing with that circumstance was that we were coming out of a financial crisis at the time. I would say that the two are very difficult to compare in economic costs, because there was limited discussion about recession at the time of the financial crisis. We knew we were going to have it. We knew there was going to be one, but the thought was that we would be able to get through. With the way in which we have had to suddenly and rapidly cease economic activity, we’re expecting potentially drops in gross domestic product of 20 or 30 percent in the second quarter of 2020. We didn’t see anything remotely close to those kinds of changes and those kinds of impacts.

And in large part it’s because in its first year, swine flu was estimated to have caused just under 12,500 deaths. And in the first three months that we’re dealing with COVID-19, we’re essentially at almost the same level of deaths in the United States.

JW: Although as a physician, I will point out to put it in some perspective, that seasonal influenza throughout the years, unfortunately, often has a death toll that’s even more than that. So we have a background of 20,000; 30,000; 40,000 or even higher deaths to just routine influenza. Obviously it’s terrible whenever a death occurs, but I did want to give a little perspective to all of these numbers.
Another question for you. With health crises such as the one we are dealing with right now, should we try to distinguish between the social toll such as we were just discussing, and the economic toll they take?

DF: I think that they’re absolutely important distinctions to be made and important separate discussions to have. The social toll is potentially catastrophic in terms of looking at the impacts that are differential, possibly across race, across age category. And thinking beyond the United States, as as you look in the emerging markets around the world, where they do not have financial resources like the United States has, health care infrastructure like the United States has, there are going to be very serious questions about the overall social cohesiveness and disruption that occur in some of these countries.

It’s not the kind of discussion we tend to need to have in the United States because of strong institutions, including social, legal and economic. But clearly the economic stresses contribute to social stresses and and there will be fallout for years to come in terms of any number of economic realms.

But as we start talking about the mental health fallout from people who did have social distancing occur, but it became problematic: I thought your point was fantastic. It’s physical distancing. It doesn’t have to be social distancing, but that may require outreach in a way that we’re not having the capacity for right now.

JW: A two part question: Along with COVID-19 pandemic, oil prices have been tumbling, particularly impacting the oil industry in the Bakken and western North Dakota, if not the entire state. First, can your remind us what’s going on globally to spur this downturn? And second, are the effects of oil prices and the coronavirus compounding one another?

DF: Globally, what we’re seeing right now is a price war within the OPEC community. Saudi Arabia and Russia are essentially fighting out competing visions for where the OPEC strategy needs to go. Saudi Arabia in particular has expressed an interest in no longer being the sole source of market discipline within the the oil cartel, letting everybody else cheat while they sit by the side and make sure that production doesn’t get too high.

Russia in particular does not like the Bakken and Permian Basin shale producers. They feel like those areas come in and hamper OPEC’s efforts to support prices. So we see that happening at a global scale, and that price decline puts a significant amount of pressure on the Bakken producers.

What we’ve seen happen in the Bakken region: We’ve had three reporting periods as of this recording, three reporting periods for unemployment in the state of North Dakota. We’ve seen something shy of 1,400 unemployment claims coming out of the mining, oil and gas sector. To give that some perspective, though, we’ve seen 5,500 unemployment claims coming out of accommodation and food service in the state of North Dakota, and 2,200 coming out of the health care and social services sector. So there are other sectors that are seeing a bigger hit than the Bakken area right now.

But the longer this goes on, and the way in which a deal is reached will certainly have serious impacts on the viability of certain companies out in the Bakken region.

And the answer to your question is yes. They are certainly compounding each other. It is two particular issues that have great economic impacts happening at the same time.

JW: Well, one final question for you, Professor Flynn. Amid all the novelty of the current situation, the 2020 U.S. Census is going on. What trends are you seeing with North Dakota population?

DF: So the North Dakota population has seen a reasonable decline in median age over time with the growth of the oil industry in particular. It is largely employing people between the ages of 24 and 35, which was a significant force in dropping median age in the state of North Dakota.

We’re also seeing, I think, some good changes in the distribution of the population in North Dakota. The Census is a great question mark for us right now, though, because, of course, the Census date of April 1 fell within this social distancing, and you should be marking where you’re living at the time. Well, there are plenty of students who should have been in their dorms or should have been in Grand Forks in North

Dakota and counted as part of the North Dakota population who could potentially now mistakenly count themselves as living at home in Minneapolis or in Denver. And so that’s an important situation we’re going to see Census dealing with going forward.

JW: With that, our time for today’s episode has come to a close. David, thanks so much for joining us today! We look forward to keeping up with your insight and analyses through regional, national and global news outlets.

DF: Thank you very much for having me.

JW: And to our listeners, please join me again next month for another edition of the UND Presidential Podcast.

Until then, so long, stay safe, be well – and stay home!