“All of the job growth from 2007 to today can easily be attributed to the shale oil fracking situation and the oil Renaissance. If you take Texas and North Dakota out of the data series for job employment, what you see is that we haven’t added any jobs in the United States other than those two regions.”
The comment above by famed bond investor Jeff Gundlach during a conference call last week set off a firestorm, repeating a trope that has been gaining traction in some quarters. The claim is that all the job creation in this economic recovery is related to the surge in oil and natural-gas fracking. This is demonstrably false.
There have been variations on this theme floating around for a few years. To get the basic claim to work, you need to accept two flawed analyses. The first is that all net job growth in the U.S. since 2007 is the result of the energy and related industries. The second is that, absent Texas, the rest of the country lost jobs.
The reports on which these claims are based are biased and full of analytical errors. Making matters worse, they both come from think tanks that specialize in slanted economic analysis. As the saying goes, torture the data long enough and it will confess to anything.
Let’s begin with a few facts: There are now 118.4 million U.S. workers in private-sector jobs. The economy lost a lot of jobs during the Great Recession, and it wasn’t until 2010 that we began adding to the nonfarm payroll numbers. According to Bureau of Labor Statistics data, more than 10 million jobs have been created since the end of 2010.
What about all of the oil and fracking jobs?
An important employment statistic for Texas is that it has the second most local and state employees in the country, ahead of NY but trailing CA. A higher percentage of the local and state employees are state employees than in NYS.
http://www2.census.gov/govs/apes/2013_summary_report.pdf
That’s the (largely) untold story of the “Texas miracle” …affordable housing and population growth means more municipal/civil services required and that means stronger GDP growth and better state and local revenues; a virtuous circle.
If Texas were well managed by people who understood that then the virtuous circle could be extended a long time, even into the inevitable period of slower growth most likely, but it isn’t and they don’t appear to so it won’t.
Chicago luxury towers raise the roof on rentals
“…In fact, the Chicago metro area saw the largest gain in population in its downtown area from 2000 to 2010 than any major city in the nation…”
http://www.cnbc.com/id/102356739
“…that 541,752 people as of March held private-sector jobs in the central area of Chicago….an all-time record…”
“…downtown gaining nearly 63,000 jobs since the recession ended…”
http://www.chicagobusiness.com/article/20141201/BLOGS02/141209983/mayoral-candidates-spar-over-new-record-for-downtown-jobs
I can speak for our business. If you were to remove the new business that we obtained from the Oil and Gas industry, and Health Care Industry we would still be bleeding. We are in Software so our headcount would not be represented in either sector.
New oil supply, and reduced demand from the international sector created cheep gas and that should be a big boost going forward so maybe we will finally see a brooder recovery.
Huh?
being big in oil and gas means that you can keep taxes ‘lower’ because you can tax every barrel produced, course the down side to that is when oil prices tank like they almost always do, that your state’s economy does too. seems to also work on the national level too (check Russia for an example)
The 21st Century economy has the feel to me of “Pass the Bubble” until the Bubble pops…then it’s musical chairs. Anecdotal observations aside, domestic fracking sure feels like a Bubble to me…and that was before the price of oil dumped.
Tech stocks
Real Estate
Energy
with a serving of Student Debt on top.
And plenty of Greenbacks to keep the Bubble transfer process well-lubed.
So…yeah, I disagree with the quote as well. But, I don’t disagree with the concern over U.S. employment as regards likely ongoing decline in domestic fracking.
It’s not % of total that matters, it’s % of growth x leverage in the system.
Housing was maybe 12-15% of GDP with all effects considered…no problem, except total U.S. debt was 350% of GDP and there were $700T in derivatives attached to that.
Oil sector itself? No problem, if it and the economy was not so highly levered. But there are hundreds of billions of HY debt, bank loans, car loans to laid off oil workers, and total U.S. debt is still 340% of GDP, with $800T in derivatives attached.
It’s never different this time.
Kind of disappointing, because I usually figure that Gundlach has his act together.
I appreciate the under known fact about Texas limiting borrowing against one’s home. I’m sure it was a response to the cattle and oil industry speculation.
Who cares about the facts and reality (the right are on record saying they create their own) – the narrative just feel so gooooooood.