“Jobless Recovery”? Absolutely Not
By Karr Ingham, Alliance Petroleum Economist
Last month, we highlighted the fact that the industry appears to be doing more with less, producing record amounts of crude oil at a lower rig count, with fewer drilling permits issued, and yes, with fewer employees compared to the peak industry employment levels in late 2014. That does not mean, however, that NO jobs have been added over the course of the current recovery – to the contrary upstream oil and gas employment nationally, in Texas, and in the Permian has grown very steadily since reaching its cyclical low point in 2016.
There are actually multiple data sets that must be consulted to make sure we have a clear picture of industry employment trends. In addition, the data typically undergoes sweeping revisions on an annual basis to tie the previously issued monthly estimates to more complete employer records (which generates one of those “other” data sets) and set the benchmarks for the monthly estimates in the year ahead. The annual revisions took place in March, and any estimate of current employment trends must be undertaken using the revised and updated data.
In Texas, upstream (exploration and production) employment swelled to nearly 300,000 jobs statewide in December 2014, and then lost about 115,000 of those jobs as a result of the deep industry contraction in 2015-16. Since the late-2016 trough, however, the industry has added back over 35,000 of those jobs and the employment levels continue to climb with each passing month. Has the Permian been left out of that picture? Of course not – in the Midland-Odessa combined metro area alone over 11,000 jobs have been added over the course of the current recovery. Regionally across the Texas portion of the Permian, those numbers will be even higher meaning oil and gas employment growth in the Permian is driving the statewide industry employment growth trends.
Nationally, the cyclical low point for upstream oil and gas employment (the sum of the “oil and gas extraction” and “support activities for oil and gas operations,” which includes service and drilling companies) occurred in January 2015 at an estimated 352,800. That represented a loss of over 182,000 jobs compared to the US upstream industry employment peak in 2014. Through March 2018, however, over 56,000 jobs have been added back and again, those numbers continue to improve with each passing month.
At times, it makes sense to look at all oil and gas-related industry employment sectors – upstream, midstream, and downstream. That must be done very carefully, however, and it is critical to note that neither downstream nor midstream employment (downstream, especially) is nearly as volatile as upstream employment and simply does not respond in cyclical fashion to oil and gas prices to nearly the same degree as upstream employment. Downstream employment in particular indicates virtually no cyclical response to commodity prices, dispelling the oft-held notion that the upstream and downstream sectors move counter-cyclically to one another, and that what is gained in one is lost in the other. In other words, these various sectors of industry employment have vastly different characteristics, and it doesn’t always make sense to include them in the same analysis, and certainly not without making these distinctions.
Upstream oil and gas industry employment has grown without question as indicated by the numbers above. And thus total industry employment – upstream, midstream, and downstream – has grown as well. The relationship between employment and production is ever-changing, and it looks different now than it did even during the previous upstream expansion. But this much is certain – upstream oil and gas employment in the Permian, in Texas, and in the US is steadily on the rise and has been since late 2016.