US energy industry loses jobs while other sectors gain
The US energy sector was a big outlier in the otherwise encouraging jobs report for June: while almost every other industry increased employment, the number of people working in oil and gas continued to drop.
According to government data from the Bureau of Labor Statistics, oil and gas extraction businesses shed 1,200 jobs last month. Including other categories associated with the sector — such as support services, pipeline construction and drilling — payrolls fell by a combined 10,000 positions, according to an analysis of the BLS data by Rystad Energy, a consultancy.
The job cuts last month added to the 100,000 job losses suffered by the sector since the pandemic began, Rystad said, underlining the deepening economic malaise in oil-producing areas.
“The oil and gas sector is continuing to contract whereas the majority of industries look to be rebounding,” said Matthew Fitzsimmons, a Rystad analyst. “The pace has definitely slowed, but I do think we're still going to see some small contractions in the coming months.”
Many of the hardest hit areas will be battlegrounds in November’s presidential election. “There are swing states that have had significant oil and gas lay-offs,” said Mr Fitzsimmons.
Rystad found that almost 50,000 energy jobs have been lost in the Republican stronghold of Texas, where polls show Democrat Joe Biden narrowly trailing President Donald Trump, who has made support for fossil fuels the cornerstone of his energy policy and a key part of his campaign.
Meanwhile, the critical swing state of Pennsylvania has lost about a quarter of its energy jobs — nearly 10,000 — a higher percentage than any other state, according to Rystad.
The slide in energy jobs — which are now down by 14 per cent since before the coronavirus outbreak — continued as the overall US unemployment rate dropped to 11.1 per cent in June from 13.3 per cent in May, according to the BLS, as employers added 4.8m new jobs.
States have cut back restrictions on activity that had been imposed to contain coronavirus, allowing industries from retail to construction to expand their payrolls once again. But a weakened oil price means activity in the oil and gas sector remains subdued.
“Oil and gas [extraction] industries continued to lose jobs in June, while most other industries have seen employment start to recover,” said Angie Clinton, National Estimates Branch Chief at the BLS’s Division of Current Employment Statistics, noting that employment trends in the sector tend to follow the price of oil.
The pandemic sent US oil prices tumbling into negative territory in April, forcing producers and support services to slash activity levels and lay off tens of thousands of workers. West Texas Intermediate, the US crude benchmark, has since recovered to around $40 a barrel but it remains down by a third since the beginning of the year.
While some producers have begun restoring wells they shut during the worst phase of the price crash, $40 a barrel is too low for most operators to begin redeploying work crews to drill and complete wells.
The US horizontal rig count — a measure of shale drilling activity — has fallen for 16 straight weeks to a 15-year low of 226, according to oilfield services group Baker Hughes. The pace of decline has begun to slow, however, suggesting it is beginning to bottom out.
“The industry has been steadily ratcheting down activity and cutting payrolls for more than a year,” said Jesse Thompson, senior business economist at the Federal Reserve Bank of Dallas. “We already had a pre-existing condition before we caught the coronavirus.”
Analysts expect energy job numbers to keep falling in the coming months, albeit at a slower pace. Big producers including BP, ExxonMobil and Shell have announced sweeping job cuts this year, many of which have not yet been completed.
“The industry is still very much in a batten-down-the hatches kind of survival mode,” Mr Thompson added. “There’s more lay-offs coming.”