Lost oil jobs are a drag

The Pak Banker - - OPINION - Justin Fox

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.

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