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An Analysis of Employment Growth Rate in

Nine Top Oil Producing States

Before and After the Oil Price Decline.

 

Nyakundi M. Michieka
Assistant Professor
Department of Economics
California State University, Bakersfield
nmichieka@csub.edu
 

 

This article assesses changes in employment in major oil producing states, following the recent decline in oil prices. Over the last 20 months, the West Texas Intermediate Spot price has dropped by 70 percent from $105.79 in June 2014 to $31.68 in January 2016. Reduced oil prices are often cited as a reason for reduced employment. Thus, the changes taking place in employment in nine oil producing states are investigated. These states are touted to have a large population working in the oil and gas sector (Brown and Yücel 2013). They include Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia and Wyoming.

The analysis evaluates changes in non-farm employees, and those in the mining and logging sectors before and after the oil price change. The average employment growth rate for non-farm employees is calculated for the 20 months leading to, and the 20 months after the oil price change.[1] Also, the total non-farm employment in June 2014 is compared to that of January 2016. This exercise is repeated for employees in the mining and logging sector, and results reported for each state. The data used in this article is obtained from the Bureau of Labor Statistics (2016) and the U. S. Energy and Information Administration (2016).

 

Statistical Analysis

 

Table 1: Seasonally Adjusted Total Nonfarm Employees

 

Table 2: Seasonally Adjusted: Total Mining and Logging Employees

Alaska

In Alaska, non-farm employment grew at an average of 0.05% over the 20 months leading to June 2014 when oil prices started dropping. This growth change declined to 0.01% in the 20 months after. Estimates indicate that total non-farm employment grew by 1,400 when data for June 2014 was compared to that of January 2016. Employment in the mining and logging sector grew at an average of 0.18% in the 20 months before oil prices began to decline but recorded negative growth (-0.14%) thereafter. A comparison of June 2014 and January 2016 figures revealed that employment in the mining and logging sector declined by 2.92%.

Louisiana

In January 2016, 1.92 million people were employed in the non-farm sector in Louisiana. Employment growth rate slowed down from 0.14% to 0.00% in the 20 months before and after June 2014. Between June 2014 and January 2016, non-farm employment in Louisiana dropped by 500. The number of persons employed the mining and logging sector increased at an average rate of 0.12% in the 20 months before the oil price decline, and thereafter witnessing a negative average growth rate of -1.35%. Data indicates that 42,500 persons were employed in January 2016, down from 55,800 in June 2014.

New Mexico

In New Mexico, the number of non-farm employees grew by 9,900 or 1.2% since the start of the oil price decline in June 2014. The rate of growth in employment in the mining and logging sector went from positive to negative when comparing periods before and after the oil price changes. Estimates indicate that the number of employees in the mining and logging sector declined from 28,800 in June 2014 to 21,300 in January 2016.

North Dakota

Non-farm employment growth went from positive to negative in the periods before and after the oil price change, meaning that the period of low oil prices was accompanied by reduced non-farm employment in North Dakota. More specifically, non-farm employment dropped from 461,400 in June 2014 to 445,200 in January 2016. North Dakota experienced the largest decline (percentage wise) in mining and logging employees. Estimates indicate that in January 2016, 18,700 workers were employed in the sector which was down from 31,600 (a 37.04% decline).

Oklahoma

In Oklahoma, non-farm employment was growing in the period before the oil price decline but this rate of growth slowed down after prices began to decline. Despite the slowdown, non-farm employment grew by 0.7% when comparing June 2014 and January 2016 employment estimates. Estimates from the Bureau of Labor statistics also indicate that Oklahoma had 12,500 fewer people working in the mining and logging sector in June 2014 compared to January 2016.

Texas

Non-farm employment grew at an average of 0.25% in the 20 months leading to June 2014. This average growth dropped to 0.19% in the 20 months after oil prices dropped. Nonetheless, in January 2016, Texas had 419,600 non-farm jobs more than the 11,542,000 it had in June 2014 – a 3.63% increase in employment. While North Dakota witnessed the largest decrease in employment percentage wise, Texas recorded the largest decrease in the number of workers working in the mining and logging industry which was 52,500 (or 253,000 down from 319,500).

West Virginia

The average percentage change in non-farm employment between October 2012 and May 2014 was 0.06%, but this average reduced in the 20 months following the oil price decline to -0.28%. West Virginia witnessed a 2.6% drop in non-farm employment when comparing employment in June 2014 and January 2016. On the other hand, employment growth in the mining and logging industry declined at an average rate of 0.35% in the 20 months leading to June 2014, with this number increasing to -1.39% in the period after the price decline. A total of 7,400 jobs were lost over the last 20 months indicating a 24.35% employment decline.

Wyoming

Non-farm average employment growth dropped at an average of 0.1% in the 20 months before the oil price change, before dropping to - 0.46% during the 20 months following the oil price increase. Comparing January 2016 and June 2014 employment estimates reveals that non-farm employment dropped by 500 or 10.9%. Employment in the mining and logging sector declined by 5,900 since June 2014 indicating a 21.38% decline in employment in the sector.

 

Conclusion

The analysis of non-farm data in the 20 months before and 20 months after the oil price change, showed that average employment growth went from positive to negative in North Dakota and West Virginia. A reduction in growth was also witnessed in Alaska, Louisiana, New Mexico, Oklahoma and Texas. In Wyoming, the negative growth in non-farm employment gets worse in the 20 months during which oil prices declined. Since June 2014, Alaska, New Mexico, Oklahoma and Texas saw a rise in non-farm employment, with Lone Star State seeing the largest gains. On the other hand, Louisiana, North Dakota, West Virginia and Wyoming witnessed negative growth in non-farm employment.

Further analyses indicate that mining and logging employment dropped over the last year and a half since June 2014. Percentage wise, North Dakota had the largest decline in employment figures. West Virginia, Louisiana and New Mexico experienced drops in employment losing one in every four people during this period. Texas on the other hand had 52,500 less employees in the mining and logging sector making it the state with the largest drop in employment numbers.

Although the shale boom was initially responsible for increased employment in North Dakota, this analysis, using data from the BLS, reports that there could be a possible link between declining in oil prices and the recent loss of employment in the North Dakota. The situation is similar in Wyoming. This warrants further investigation as such study is beyond the scope of this paper.

This analysis does not go without caveats. First, employment is affected by other economic, social, political and spatial factors which are not accounted for in this analysis. Secondly, the mining and logging data is an aggregated figure and may not accurately depict changes occurring the oil sector exclusively.

 


Note:               

[1] June 2014 is used as the midpoint in this analysis because oil prices went up after that.

 


References:

Brown, S. P. A. and M. K. Yücel (2013). The Shale Gas and Tight Oil Boom: U.S. States’ Economic Gains and Vulnerabilities. Energy Brief. C. o. F. Relations. Council on Foreign Relations.           

Bureau of Labor Statistics (2016). Local Area Unemployment Statistics. B. o. L. Statistics. Databases, Tables & Calculators by Subject.

U.S. Energy Information Administration (2016). Spot Prices (Crude Oil in Dollars per Barrel, Products in Dollars per Gallon). U.S. Energy Information Administration.

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