Sure, rock-bottom crude oil prices are bringing smiles to our faces at the gas pump. But those of us who live, work and recruit in Texas can’t help but fear those low gas prices are an ominous sign. Will it kill the Texas economy? How is it affecting jobs in other industries? Here’s the current landscape.
Job losses in Texas
It’s reported that U.S. companies eliminated about 1,100 oil-and-gas jobs in February. The news seems dire, unless it’s put into context. According to the Beaumont Enterprise, those numbers represent an only 0.6 percent decline in oil-and-gas payrolls. Many of those jobs, however, were in Texas…and they are expected to continue. USA Today reports oilfield services giant Schlumberger, for instance, plans to cut 9,000 jobs this year — about 8 percent of the company’s workforce.
When it’s all said and done, local economist Angelos Angelou believes 150,000 jobs related to oil-and-gas production could be lost. “Otherwise,” writes Beaumont Enterprise’s Jennifer A. Dlouhy, “oil and gas has been the engine driving the United States’ economic recovery.” Texas Tribune supports that statement, adding that “Texas is pumping more oil than it has in 30 years, accounting for more than one-third of all U.S. production.”
Among the biggest losers? Petroleum engineers
While the news is mixed, there are certain professionals who may be experiencing an undeniable squeeze. Namely, petroleum engineers. According to a recent report by fuelfix.com, ads recruiting petroleum engineers in Houston were down 43.8 percent in January. The Houston Chronicle puts that news into shocking perspective by reporting, “Nearly three dozen oil and gas companies visited Texas A&M University last spring to recruit students from its prestigious petroleum engineering program. This year, the school expects three. Meanwhile, companies have rescinded job offers to some students.”
The article goes on to point out how massive job losses during the oil bust of the 1980s essentially drove an entire generation of workers away from the industry, which created a talent gap that, up until a few months ago, was a major problem for those competing for petroleum engineers.
Could it happen again? It’s not out of the question, especially since engineering jobs as a whole (fueled by those outside the oil-and-gas industry) remain very strong—rising 9 percent from January 2014 to January 2015.
Are the losses seeping into other industries?
Some experts have seen the losses “expose cracks” in related industries, including those you might not think of first, like commercial-mortgage lending. Even in Texas cities with diverse economies, the drop in oil prices is hurting these companies and others in the real estate market, reports Bloomberg’s Sarah Mulholland.
“The pullback may signal a shift in fortunes for U.S. oil-and-gas centers such as Houston and Austin, Texas. As recently as October they were named the most attractive markets for buying and developing real estate in 2015 in a survey by PricewaterhouseCoopers and the Urban Land Institute,” Mulholland writes. “Right now,” Kevin Roberts, president of the Southwest region at commercial real estate services firm Transwestern adds, “people have hit the pause button a little bit.”
The Washington Post reports that while much of Texas has diverse economies that will be able to withstand the sluggish oil-and-gas prices, local governments in the major production regions will be hit hard. Those hits will come in the way of lower sales tax revenues, tax base valuations, construction and permit revenues.
The silver lining
The flooded oil-and-gas market will slow down Texas in 2015 for sure, but it will not put Texas into a recession renowned Economist and President of The Perryman Group, Dr. Ray Perryman told attendees of The Southeast Texas Economic Development Foundation’s Economic Forecast Breakfast.
“We are not going to see 400,000 jobs next year. Our forecast is about half that. Texas will slow down, but it will continue to grow,” predicts Perryman, adding that Southeast Texas would continue to see output growth well ahead of the national average. “Some [Southeast Texas] industries benefit from lower oil prices.”
Economist Angelos Angelou agrees. “While oil prices may hurt Houston and West Texas, they’re actually a benefit to the Texas economy overall,” he says.
What’s your take? Do you think oil-and-gas hardships will affect hiring in other Texas industries? Are you seeing a shift in your own industry?
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