Lost oil jobs are a drag
THE U.S. economy added 151,000 jobs in January, according to today'snonfarm payrolls report. If it hadn't been for the danged oil bust it would have been maybe 180,000. That's a guesstimate. There's no January data available yet for several of the oil-related employment categories, so I assumed that industry job losses continued at December's pace. Then I used a rough multiplier to get at the impact of oil-and-gas job losses on other industries. Here's the non-guesstimate of employment from 2000 through 2015 in four key oil-and-gasextraction-related industries: Thanks to the production boom enabled by hydraulic fracturing (aka fracking) and horizontal drilling, the industry added about 400,000 jobs from 2004 through 2014 in what was overall a pretty weak job market. Some of those were very good jobs: Average hourly pay in oil and gas extraction in December was $42.72, compared with $25.27 for the private sector in general. (Hourly pay in support activities and pipeline construction was lower, at $27.30 and $29.78, respectively; earnings data isn't available for oil-and-gas machinery manufacturing.)
Then there's the multiplier effect -- new jobs in oil and gas extraction lead to the creation of other jobs in construction, retail, restaurants and other fields. There's been a lot of discussion and debate about what the correct multiplier is. People in the industry say it's fouror more, but I found other estimates nearer to three -- meaning that two additional jobs are created for each new job in the industry. I'll go with three, because I'm the skeptical sort. Here are the estimated job gains from oil and gas extraction (the actual gains in the four categories above plus the multiplier gains) and overall job gains from when nonfarm employment started growing after the recession in March 2010 to when oil and gas employment stopped growing in October 2014. And here are the estimated oil-and-gas employment losses and nonfarm employment gains since oil and gas started shedding jobs in November 2014: This is not exactly a scientific exercise. The multiplier job gains and losses wouldn't necessarily occur simultaneously with the oil-and-gas gains and losses; they'd probably come later. And the economic effects of an oil-and-gas-industry slowdown caused by falling prices are very different from the effects of one caused by wells running dry. In the former case, as I have argued before, most of the rest of the economy benefits from the very thing -- low prices -- that is hurting oil-and-gas producers.