Jobs Boom in Oil Production Helping to Offset Harm from Gas Price Spike
On Friday, the U.S. Bureau of Labor Statistics (BLS) released the February jobs report, showing an increase in employment by 227,000 – the third month in a row of job growth higher than 200,000. This report, coupled with strong numbers from the stock market and other leading indicators show that we may finally be entering a point of sustained economic recovery from the 2008 financial crisis. However, some people are speculating that the run-up in gasoline prices will push the recovery off track (see: LA Times, USA Today, Businessweek).
I think this run-up in gas prices is different than previous ones, because our economy is more balanced between oil producers, who benefit from high prices, and consumers, who are harmed. On balance, I agree with Professor Hamilton’s view over at Econbrowser: high gas prices won’t derail the U.S. economy.
One of the best articles showing the beneficial impact that the oil industry is having on America’s job growth comes from Canada’s Financial Post (from Friday). Here’s the main part:
The beneficiaries of this shale oil and gas boom are many and diversified both by region and by sector. With an estimated 3,000 new wells slated to be drilled in the next year, it is positive for job creation. Already, the depressed housing industry is stepping up production to house the growing number of oil workers and their families in states from Texas straight up to North Dakota, including Louisiana, West Virginia, Colorado, Montana and Wyoming.
Combined with the increasing availability and low price of natural gas, rising domestic oil production is providing a boon to U.S. construction and industrial production. The price of land in these regions has skyrocketed and many small landowners have pocketed huge leasing windfalls, even in places that were formerly considered waste land.
The one question that I’m trying to determine is if this is a good thing. Just because these jobs are created, it doesn’t follow that it’s an automatic benefit. As Martin Mizera commented to my March 2 post, “There used to be a LOT of tobacco industry workers… Was that a good policy?” There are open questions about whether investing in an industry that is, by its very nature, polluting, is a good thing. The Financial Post article mentions that as well:
With this boom, there are a growing number of concerns. The environmental impacts, though uncertain, are troubling. Potential pollutants entering the air and water supply are of great concern. Drilling is disrupting communities, damaging roads, and increasing costs to local governments. Some are worried about the effect of drilling on earthquakes. Risk of a boom-bust phenomenon, so evident in many oil regions, is also real.
On balance, I don’t know whether this job boom in energy will be good over the long-term, but for a country that has badly needed new jobs for almost four years now, it is certainly helping our short-term problems.