U.S. Has Shed 100,000 Oil Jobs, "More Layoffs Virtually Certain"
(By John Kemp)
The number of people employed in oil and gas extraction and support activities across the United States has fallen by around 100,000 since October 2014.
Between October 2014 and November 2015, the number of people on the payroll of oil and gas extraction firms and support services fell by almost 87,000, according to the U.S. Bureau of Labor Statistics (BLS).
But once data on job losses in December and January becomes available, the total reduction is likely to be around 100,000, or 16 percent of employment at its peak.
Total employment in oil and gas production and services fell from almost 538,000 in October 2014 to 451,000 in November 2015 and is likely to have slipped under 440,000 in January.
Over the same period, the U.S. economy has added more than 3.5 million jobs in other sectors, according to the BLS Current Employment Statistics survey.
But the raw figures on job losses and additions do not tell the whole story because the jobs lost paid relatively high wages.
During the oil and gas drilling boom from 2004 to 2014, the industry created some of the best-paid jobs in the economy for workers at all levels from roustabout to petroleum engineer.
Before the slump in oil and gas prices, the median pay for a rig operator was $47,000 per year compared with $35,500 for all occupations in the economy.
Even a comparatively unskilled roustabout, or labourer, was earning an average of almost $36,000 in May 2014, according to data from the BLS Occupational Employment Statistics survey.
These are averages for all employees at all levels of skill and seniority. Some workers were earning considerably more. At the top end, drillers were earning over $80,000 and roustabouts more than $55,000.
At the top of the industry, petroleum engineers, among the most highly trained personnel, often with supervisory roles, were averaging more than $130,000, rising to more than $180,000 for those in the top quartile.
The job losses identified in the BLS Current Employment Survey are only for those directly employed by firms in oil and gas extraction and support activities, and do not include all the other job losses in the supply chain.
For example, the number of jobs in the U.S. railroad industry fell by more than 10,000 between April and December 2015, with the downturn in oil- and gas-related freight one contributory factor.
Railroad employees, from track layers and dinkey operators to hostlers and locomotive engineers, tend to earn significantly above the national average for all occupations.
The same is true in other parts of the oil and gas supply chain, from steel workers producing oil pipe to manufacturers of oilfield pumps and generator sets.
Then there are job losses in retailing, accommodation, real estate and other industries not directly linked to oil and gas production but in parts of the country with a large oil and gas presence, such as North Dakota and Texas.
More layoffs are virtually certain in the months ahead in oil and gas production, as well as along the supply chain and in petroleum-dependent economies, as the continued price slump filters through to even less drilling activity.
The number of rigs drilling for oil and gas has fallen from over 1,900 in October 2014 to 744 at the end of November 2015 and just 619 at the end of January 2016, according to oilfield services firm Baker Hughes.
More layoffs will inevitably follow at drilling firms as well as their suppliers as the whole industry downsizes in preparation for a prolonged downturn.
The oil and gas industry accounts for significant employment and is an even more significant driver of investment spending and growth along the supply chain, ranging from aggregates to steelmaking and specialist equipment.
On its own, however, the oil and gas sector is not big enough to push the U.S. economy into another recession, as Matthew Klein at FT Alphaville has explained ("What might the next recession look like?" FTAV, Feb. 1).
Consumer spending on big-ticket items such as homes and cars is far more important for whole-economy growth.
But in combination with a stronger dollar, slowing growth in international markets, and an over-accumulation of inventories through much of the economy, the oil slump is creating headwinds for manufacturers, freight firms and the wider economy.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.