Texas, a robust job producer, starts to feel sting from falling oil prices
Data from the U.S. Bureau of Labor Statistics show that Texas has fallen even further from its previous top spot in terms of states creating the most new jobs. The job market and economy is still growing, but more slowly, and the layoffs announced by the oil and gas sector have just begun.
In 2014, the Federal Reserve Bank of Dallas estimates, Texas’ employment base grew by approximately 3.4 percent. This year, the Dallas Fed thinks the state will be lucky if payrolls increase by 2 percent, while growth may come in at 1 percent.
Michael Seman, a senior research associate at the University of North Texas’ Center for Economic Development and Research, said he expects Houston to feel the most pain among the state’s top metropolitan centers.
“Houston’s employment numbers in the oil and gas industry is about 11 percent of all the jobs, whereas in Dallas-Fort Worth, it’s about 5.4 percent, 5.5 percent,” he said. “In the overall economy of Dallas-Fort Worth, oil and gas is only about 3 percent.”
Job losses are occurring first and fastest in the oil fields, primarily in the Permian Basin region surrounding the Midland-Odessa area, and in the more rural south Texas Eagle Ford Shale oil and gas fields, where the number of active drilling rigs is down to half what it was during the good times. Now job losses are coming to Houston, with fresh layoffs announced this week, including at steel pipe manufacturer Tenaris, a company that committed itself to a $1.5 billion expansion plan in 2012.
Houston’s mayor’s office estimates that the city is home to some 5,000 companies doing business directly with the oil and gas industry.
More job losses for Houston and Texas as a whole are expected for months to come. By some estimates, some 40,000 jobs could be lost across Texas should oil prices fail to recover to levels deemed profitable by most of the industry. 100,000 jobs may be lost nationally.
Ripple effect
Job losses in the oil and gas industry will eventually hit other parts of the state’s economy.
“While many sectors of the Texas economy remain strong, headwinds will likely damp growth in 2015,” the Federal Reserve Bank of Dallas predicts in its quarterly estimates. “The energy sector has begun losing significant numbers of jobs following the recent sharp decline in oil prices. This will, over time, ripple through other sectors of the economy, such as truck, pipeline and rail transportation; warehousing; equipment manufacturing; hospitality; construction; and retail.”
The momentum of growth and a much more diversified economy should help the state weather the oil price crash better than was the case during the previous down cycle in the 1980s, experts generally agree.
The U.S. Census Bureau estimates that the Houston metropolitan region alone gained a net 100,000 new residents in 2014, or about 274 new arrivals to the city each day for the year. The Dallas-Fort Worth metropolitan area expanded in population in part by adding about the same number of new residents, the Census Bureau says.
Seman said job losses in North Texas so far have been muted, as the Dallas metro region has a much more diverse employment base, particularly in finance, insurance, real estate and communications. But professional service job losses will hit that part of the state, too, should weaker oil pricing persist, he estimates.
“Let’s say oil continues on at $50 a barrel for a long time,” Seman explained. “If it stays at $50, you’ll probably see a bit more unemployment in our professional services, because we have a lot of people that are in things such as legal, finance and such that service the oil industry. You may see them start losing jobs.
“But even then, it’s not going to be anything like it was, say, in the 1980s.”