Kemp: Unemployment rising in former oil boom states
LONDON -- The human cost of the oil slump is increasingly apparent in the number of claims for unemployment insurance being filed in states that were formerly at the heart of the drilling boom.The number of people claiming unemployment insurance ...
LONDON -- The human cost of the oil slump is increasingly apparent in the number of claims for unemployment insurance being filed in states that were formerly at the heart of the drilling boom.
The number of people claiming unemployment insurance in Texas, Oklahoma and North Dakota at the end of January 2016 had risen by almost 42,000 compared with a year earlier, an increase of 25 percent.
Across the rest of the United States, the number of unemployment insurance claims fell by 125,000 over the same period, according to data from the U.S. Employment and Training Administration.
Unemployment rates in Texas and Oklahoma are still below the national average but have been on an increasing trend since the start of 2015.
North Dakota, which had the lowest claimant rate of any of the 50 states in 2014, now has an above-average unemployment rate.
The national unemployment insurance claim rate has edged down from 2.2 percent to 2.0 percent over the last 12 months.
But in Texas, the claim rate has risen from 1.3 percent to around 1.6 percent, while Oklahoma the rate is up from 1.1 percent to almost 1.5 percent.
In North Dakota, the claim rate has risen from 1.6 percent at the end of January 2014 to 2.3 percent at the end of January 2015.
Claims for unemployment insurance have a strong seasonal component and normally peak during the first quarter of each year.
But the underlying trend has clearly deteriorated in the oil-producing states while it continues to improve in the rest of the country.
North Dakota’s unemployment claim rate has surged to the highest in six years as drilling activity in the state slumps.
The number of active rigs in North Dakota has fallen to just 35, down from 120 at this point last year, according to the state’s Department of Mineral Resources.
In Oklahoma, the number of active rigs has fallen by 73 (50 percent), and in Texas the rig count is down by almost 350 (40 percent), over the last 12 months, according to oilfield services company Baker Hughes.
Direct layoffs by drilling contractors have rippled through the supply chain to cut employment at suppliers and service companies.
The second-round effects have resulted in job losses at retailers, real-estate agents and other service companies in oil and gas producing areas.
For large diversified economies such as Texas the overall impact on the economy should be modest, slowing growth rather than pushing the state into recession.
Total insured employment in Texas has increased by more than 150,000 (1.4 percent) over the last year, though that is a marked slowdown from the increase of 340,000 (3.2 percent) reported in the previous 12 months.
But in smaller, less-diversified economies such as Oklahoma and North Dakota, and even in specific oil-dependent localities of Texas, the downturn is hitting very hard.
Separately, the U.S. Bureau of Labor Statistics has reported the number of people employed by oil and gas producers, as well as oilfield service companies, has fallen by around 100,000 since September 2014.
Some have already found employment in other industries, or relocated to other states, but at least some still seem to be unemployed, given the correspondence between the two series.
The total number of workers affected directly and indirectly by the end of the oil boom, through unemployment, reduced job security, and cuts in hours and pay, is likely to be well in excess of half a million.
Kemp is a Reuters market analyst.