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Energy-Related Job Losses Hurt Pennsylvania's Employment Growth in 2015, Cleveland Fed Says

Pennsylvania's employment growth in 2015 fell short of the national rate, a trend that was likely driven in large part by its exposure to the oil and natural gas industry downturn and energy-related job losses, according to an analysis by the Federal Reserve Bank of Cleveland.

Employment in Pennsylvania grew by just 0.7% in 2015, or by less than half of the national rate of 1.9%. The state's rate also declined significantly from its 1.2% employment growth in 2014.

"Given Pennsylvania's status as one of the largest producers of energy in the country, it's perhaps not surprising that the recent downturn in energy markets has had an outsized impact on the state," said Guhan Venkatu, an economist at the Cleveland Fed's Pittsburgh branch.

The bank found that from December 2014 to December 2015, a period that closely tracked the rapid decline in oil prices, Pennsylvania's employment growth ranked it 39th out of all 50 states. Employment in the state's mining industry, which includes oil and gas extraction, declined by nearly 11% in 2015, compared to growth of 4% in 2014.

According to the U.S. Dept. of Energy, Pennsylvania's natural gas production doubled between 2012 and 2014. It was more than 20 times higher in 2014 than in 2008. Shale drillers produced 4.07 Tcf of natural gas in 2014 (see Shale DailyFeb. 17, 2015). While the growth wasn't as marked as it has been in recent years, unconventional production increased to 4.6 Tcf in 2015, reflecting the decline in active rigs, capital spending cuts and workforce reductions that took place throughout 2015 (see Shale DailyFeb. 22).

Since late 2014, several of the Marcellus and Utica Shale's leading operators have publicly announced significant job cuts, the closure of regional headquarters and plans to markedly scale-back their operations (see Shale DailyJune 19, 2015). The bank said that of the seven states that saw their total employment decline in 2015, all were among the top-10 energy producers in 2013, except for Alaska, which is still a major energy producer. The only reason Pennsylvania avoided an employment decline last year, Venkatu said, was because of its diversified economy.

The slowing in employment growth in the state, he added, was also likely due to slower population growth. From 2000 to 2010, the U.S. Census Bureau shows that population growth was much faster in the South and West, compared to the Midwest and Northeast.

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