Spencer England has a post over at Angry Bear about the recent surge in oil and gas jobs in which he argues that the effect on the economy is minimal. He acknowledges that indeed a lot of jobs have been created in the industry:
I regularly see right wingers and republicans claiming that we should allow unlimited oil and gas drilling because it would create so many jobs.
If you look at the recent data on growth in employment in oil & gas drilling it appears they may have a good argument. Over the past year employment in oil & gas drilling rose 11.3%, only down slightly from its January peak of 14.5%. Employment growth in the sector almost reached its 1980 peak growth rate of 16.5 %.
As Mr. England then explains, the effect on total employment and the economy is quite small:
Currently, oil & gas exploration employment is some 0.15% of total payroll employment. That is correct, zero point fifteen percent, not fifteen percent. Under the assumed sluggish growth scenaro
oil & gas employment would reach a new record share of 0.32%f of payroll employment in 2020.. The some 289,000 increase in oil & gas extraction employment would account for about 1.6% of the total employment gains.
It is like last years record real GDP growth in North Dakota. Because of the oil boom in 2011 real GDP
grew 7.5% in North Dakota, far stronger than any state. This very rapid growth caused North Dakota’s share of total US real GDP to rise from 0.24% to 0.26%
So even if you allow them to have their extremely optimistic assumptions, unlimited oil & gas extraction is unlikely to have a significant impact on total employment growth.
He also adds this for perspective:
To put this in perspective, assume continued sluggish economic growth of some 2% to 3% real GDP growth and annual employment growth of around 1.6%. . By 2020 this would bring the unemployment rate under 5%.
I’m no Republican or right winger and I don’t believe we should allow unlimited oil and gas drilling (although I do think we could do more) but I just don’t get the logic of this argument. Is Mr. England saying that growing at below trend rates until 2020 is acceptable? Or is he saying that is the best we can expect regardless of how may oil and gas wells we drill? Does Mr. England believe we shouldn’t have allowed the drilling that has already occurred? Are the jobs created so few that he can just wave them away as insignificant? I bet the people who have those jobs don’t see them as insignificant.
And how exactly did he determine that this growth rate would produce employment growth of 1.6% and an unemployment rate of 5%? Does he know what population growth will be in that time? Does he know what the participation rate will be? Republicans may be pulling numbers out of their nether regions when predicting job growth based on more liberal drilling policies but so is Mr. England. What if his wild ass guess is wrong? Would these jobs be important then?
I am on record as saying that a lot of the shale drilling activity is a result of nothing more than money illusion and that just like the last time this happened it will end up wasting a lot of capital. But I am humble enough to admit that I might be wrong about that. If I am, these are good jobs, filled by real people with real lives. We shouldn’t minimize them or dismiss them as irrelevant. An economy is made up of lots of small pieces that interconnect in ways that are impossible to fathom by any individual. The first jobs created at Amazon or Apple or Intel were irrelevant to the economy at the time. There is no way to know the effect on the future of even one job being created today. What if someone gets a job driving a truck in North Dakota because of the oil boom, saves his money, uses the savings to go to college to get an engineering degree, invents a process that reduces the cost of solar power and founds a company that creates 100,000 jobs making solar panels? Would Mr. England still say that the oil and gas drilling jobs created now are irrelevant?