Oil may sap Texas job growth
Long run of $30 crude threatens to send state ‘into negative territory,’ Fed warns
Texas could lose jobs for the first time in seven years unless crude prices in 2016 stage a major recovery, the Federal Reserve warned on Tuesday, as U.S. oil briefly tumbled below $30 a barrel.
A top economist for the Federal Reserve Bank of Dallas forecast 1.4 percent job growth in Texas this year, a third of what it was in 2014, but said that such a bump in non-farm payrolls will materialize only if oil prices rise and spend a big portion of the year in the $40- to $50-a-barrel range.
If crude prices don’t climb back up, Dallas Fed Senior Economist Keith Phillips said in a written statement, “then I expect job growth to slip into negative territory as Houston gets hit much harder and greater problems emerge in the financial sector,”
“But we are constantly surprised by oil prices,” he added. “If they jump up past $60 and hold, Texas will likely return to growth above the national aver-
age.” U.S. oil hasn’t topped $60 since June.
At a presentation in San Antonio, Phillips said Texas’ jobless rate could rise to 4.9 percent, up from 4.6 percent, by the end of the year if oil is in a $40 to $50 range.
Last year, he added, Texas lost about 50,000 energy jobs, accounting for about a third of the state’s job losses.
Texas hasn’t had a full year of negative job growth since 2009 during a national recession, when jobs declined 2.8 percent year over year, according to Texas Workforce Commission data. The agency reported positive growth for the first 11 months of 2015. It hasn’t yet posted December jobs numbers.
Local economy
The Houston-area economy, which has a closer link to the oil industry than the broader state, kept adding jobs each month as well, but always at a slower pace. Local employers added 23,700 jobs in November, a fraction of the 103,400 new jobs in November 2014, when crude traded above $70 a barrel.
In Tuesday trading on the New York Mercantile Exchange, U.S. benchmark West Texas Intermediate crude fell 97 cents to $30.44 a barrel, its lowest close since Dec. 1, 2003. It has fallen 18 percent this year and briefly dipped as low as $29.93 a barrel Tuesday before rising at midday.
Brent, the global benchmark, lost 69 cents to $30.86 in European trading.
Average of $38.54?
The U.S. Energy Department estimates domestic crude will average $38.54 a barrel in 2016. If crude prices recover by a third to two thirds this year, Texas payrolls could add about 161,000 jobs — slightly more than last year. But even then, the Dallas Fed said, Texas job growth would come in well below the 410,900 jobs the state added in 2014.
The Federal Reserve’s warning came as BP on Tuesday became the first major oil company to signal another wave of deep job cuts is on the way. BP plans to shed 4,000 oilproduction jobs this year, about a fifth of its exploration and production business, to cope with cheap oil prices. The cuts will be complete by 2017.
“We continue to simplify our business, improve efficiency and reduce costs,” BP spokesman Brett Clanton said in an email.
The cuts would double the number of jobs BP has axed and become part of the 257,000 jobs the oil industry has cut around the world since the oil downturn began in 2014, according to Houston oil consultancy Graves & Co.
‘Going to be everyone’
BP’s reductions also signal the kind of jobs that oil companies will cut this year. Oil exploration and production jobs made up a small fraction of the jobs that were lost at the beginning of last year but have slowly climbed to a fifth of the overall exodus, Graves estimates.
“That’s where the industry will get hit the hardest this year,” said John Graves, president of Graves & Co.
“It’s going to be everyone from administrative assistants, to engineers, geologists and geophysicists — everyone you need to run an oil company. If you want to stay in your profession, it makes life very difficult.”