WASHINGTON — Energy production is driving explosive population growth in states such as North Dakota, while other economic and demographic factors are constraining the growth of states such as West Virginia, according to a Fitch Ratings report released Friday.
The Fitch report takes a closer look at the updated population figures released by the U.S. Census Bureau in December, noting that many western states with strong energy production industries were among the biggest population gainers from 2012 to 2013. Population growth is a positive factor analysts consider when evaluating a state because it indicates an expanding economy and tax base, Fitch said. Total population is also tied directly to how much of private activity bonds the Internal Revenue Service allows a state or territory to issue. The 2014 volume caps are the greater of $100 per capita or $296.83 million,
"Western and southern states were the fastest-growing states in the U.S. between 2012 and 2013, with Utah, Colorado, Texas and Nevada rounding out the top five behind North Dakota," Fitch analysts wrote. "One commonality among four of the five is robust energy production."
North Dakota's population grew 3.14% year-over-year, which was more than four times the national rate of population growth.
"The state's booming natural resources sector has been a key factor in the rapid population gains, with an expanding economy attracting new workers," Fitch said. "Between 2010 and 2011 (the latest data available from the U.S. Energy Information Administration) the state's energy production grew a robust 21.1%, the sixth highest among U.S. states."
The agency also pointed out, however, that the state's growth was magnified by its very small baseline population, which remains the third smallest in the U.S. behind only Wyoming and Vermont. Fitch said states experiencing rapid energy-industry growth have previously seen their population surges trail off after a few years.
"For example, in the first half of both the 1970s and 1980s, Alaska experienced rapid population growth up to 10 times the national rate that was directly tied to oil industry expansion," the report states. "Year-over-year growth rapidly trailed off and was below average by the end of each decade."
Major energy producers Colorado and Texas also experienced big population gains in 2013, ranking third and fourth in year-over-year population growth rates in 2013. The energy industries in those states have grown modestly compared to the growth in North Dakota, but Texas and Colorado are among the top producers overall. Texas was the top energy producing state in 2011 and Colorado ranked seventh, compared to North Dakota's 13th, Fitch noted.
But a strong energy industry failed to produce positive population trends for West Virginia and Pennsylvania, two other top energy producers at fifth and fourth in the nation respectively. Fitch said that above-average energy production is only one factor in a state's population growth and could be countered by many others.
"In a larger, more economically diverse state like Pennsylvania, energy production gains may not offset deeper factors limiting population growth on a statewide basis, such as the above-average age of the state's population," the report states.
Fitch also noted that population volatility, even growth, can pose budgetary challenges for states who must consider whether the change is sustainable. Utah governor Gary Herbert's recent state of the state address highlighted population growth as a budgetary planning pressure, the report notes.
"Fitch will continue to evaluate annual and long-term population growth trends as part of its analysis of U.S. states' economic profiles," the report concludes. "Population trends are considered in the context of broader economic developments, and analysts study the factors underlying a state's results."
