Where are the Jobs? In Oil and Gas
Five years after the beginning of economic recovery, U.S. employment is still almost one million jobs below 2007 levels. However, jobs related to America’s oil and gas industry have been booming. Jobs in the oil and gas sector have increased by 40 percent since 2007 (see graphic). In a new report,
"Where the Jobs Are: Small Businesses Unleash Energy Employment Boom," Manhattan Institute senior fellow Mark Mills shows the substantial impact of this industry’s growth on U.S. employment levels.
After 30 years of employment declines, more than 400,000 jobs have been created in direct production of oil and gas and two million more in indirect employment since 2003. Now, one million Americans work directly in the oil and gas industry, and ten million jobs are associated with that industry.
Previously stagnant sectors of the American economy, such as chemicals production, steel, and textiles, are all seeing revitalized growth due to low-cost, reliable energy. For every direct job created by the oil and gas boom, there are three jobs created in other industries.
Because of increased oil and gas production, Americans are building infrastructure for the hydrocarbon extraction, transportation, and processing industries. New steel mills, railcars, and pipelines are being constructed. Refineries are rapidly expanding and shipyards are booming. This entire economic stimulus is genuinely “shovel-ready” and government subsidy-free. Federal, state, and local tax receipts are generated from individual incomes and business growth.
The ten million hydrocarbon jobs are widely distributed across the nation. There are 16 states with more than 150,000 people employed in hydrocarbon-related activities. However, the highest employment effects have been in the ten states at the epicenter of the shale boom.
The broad jobs benefits are most visible in North Dakota and Texas, where overall state employment growth in all sectors has vastly outpaced the U.S. average. Overall employment growth has also been above-average in other states, such as Pennsylvania, Colorado, Louisiana, Oklahoma, and Wyoming.
As Mills points out, “The Marcellus shale fields in Pennsylvania were responsible for enabling statewide double-digit job growth in 2010 and 2011 and now account for more than one-fifth of that state’s manufacturing jobs.”
Additionally, in Ohio, where oil and gas production restarted in 2011 after 100 years without it, job growth has occurred in the dozens of shale-centric counties even as other Ohio counties have lost jobs.
Oil and gas jobs pay nearly 30 percent more than the industrial average. This wage effect is most clearly visible in Texas. In the 23 counties atop the Eagle Ford shale, average wages for all citizens have grown by 15 percent annually since 2005—more than double the average growth for Texas and the U.S. over the same period. The top five counties in the Eagle Ford shale have experienced an annual average wage growth of 63 percent.
Recent history shows that hydrocarbon-related jobs and the economic boom that accompanies them can develop quickly. In only a few years, employment has grown radically in the states which embraced increased production. The same could happen in many other states if they adopted policies that are more favorable to oil and gas production and development.
The National Association of Manufacturers estimates the shale revolution will lead to one million manufacturing jobs over the next ten years. The McKinsey Global Institute forecasts that expanding shale production can add almost two million total jobs over the next six years.
Other analysts looking out over 15 years see 3–4 million total jobs coming from accelerating domestic hydrocarbon energy production. Even these forecasts underestimate what would be possible in a political environment that embraced pro-growth policies. The consensus is clear—barring government intervention, America’s oil and gas boom is going to lead to a lot more jobs.
However, these impressive gains are not guaranteed to continue. There are many regulatory risks, including delays in approval of exports, opposition to expanding ports, pipelines, and refineries, and redundant federal regulations on hydraulic fracturing technology.
Hydrocarbon jobs cannot solve our employment problems alone. As Mills argues, “America’s future, of course, is not exclusively associated with hydrocarbons or energy in general. Over the long term, innovation and new technologies across all sectors of the economy will revitalize the nation and create a new cycle of job growth, almost certainly in unexpected ways. But the depth and magnitude of job destruction from the Great Recession means that creating jobs in the near-term is vital.”
In recent history, few if any parts of the U.S. economy have had as dramatic an effect on short-term job creation as the American oil and gas boom. With the right policies, this employment growth can become even more dramatic and help turn the recovery from tepid stagnation to robust expansion.