Strengthening crude oil prices and modest increases in drilling activity have yet to translate into an improving employment picture for Texas oil and natural gas workers, according to the latest Texas Petro Index (TPI), a barometer of industry health.

Unemployment in the industry continues to rise, and the number of jobs lost in Texas has surpassed 100,000, according to Karr Ingham, the Texas economist who compiles the monthly TPI. Ingham uses state employment data and makes his own adjustments to more accurately reflect oil/gas patch employment trends.

Looking at oil and gas industry employees directly engaged in oil and gas extraction, numbers have fallen almost 12% since December 2014 according to figures from the Bureau of Labor Statistics for Texas. On the bright side, preliminary data for May 2016 indicate a slight increase month over month in employment of about 0.5%.

Texas oil/gas industry employment has declined to 205,100 from a peak of about 306,020 in December 2014. "The last time industry employment was this low was in late 2010 as the last expansion of upstream oil and gas activity in Texas was just beginning to take off," Ingham said.

Even though crude oil prices increased for the third consecutive month in May, unemployment continues to rise, he said. However, there is cause for optimism within the data that make up the TPI.

Crude oil prices in Texas averaged $43.38/bbl in May, up from an average of $27.08 in February. Also, since the number of drilling rigs operating in Texas declined to a 2016 weekly low of 173 units in late May, weekly rig counts in June have come in slightly but steadily higher.

"Finally, some producers are beginning to see the fruits of the turmoil endured by the industry during this extended contraction of upstream oil and gas activity," Ingham said. "Dramatically lower demand for drilling, oilfield services, and even labor appear to have driven down costs enough that some operators calculate they can develop some properties profitably with oil prices at current levels. But there still is a lot of work to do to bring global oil supply and demand into line with one another.

"But that process is playing out before our very eyes."

Other TPI indicators show that the upstream oil and gas economy in Texas continues to deteriorate. The number of drilling permits granted in May by the Railroad Commission of Texas totaled 606, the fewest permits issued in May in the history of the TPI, which goes back to1995. The number of permits issued year-to-date through May totaled 2,883, the fewest in the first five months of the year since 1999, according to the TPI.

"There's an old saying: 'Low prices are the cure for low prices,’" Ingham said. "Low prices rebalance supply and demand by stimulating consumption and decreasing production. Costs have declined significantly, and some producers are finding crude oil pricing can be profitable at a much lower level than was the case during the expansion."

A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in May was 159.9, 39.7% lower than in May 2015. Before the current economic downturn, the TPI peaked at a record 313.3 in October and November 2014, which marked the zenith of an economic expansion that began in December 2009, when the TPI stood at 187.4.

May crude oil production in Texas totaled an estimated 103.7 million bbl, 5.1% less than in May 2015, according to Ingham. With oil prices in May averaging $43.38/bbl, the value of Texas-produced crude oil totaled nearly $4.5 billion, 26.4% less than in May 2015.

Estimated Texas natural gas output in May was about 721.4 Bcf, representing a year-over-year monthly decline of about 3.1%. With natural gas prices in May averaging $1.76/Mcf, the value of Texas-produced gas declined 37.5% to about $1.27 billion.

May’s Baker Hughes count of active drilling rigs in Texas averaged 182, 51.5% fewer units than in May 2015 when an average of 375 rigs were working. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012.

The number of original drilling permits issued in May was 606, 33.8% fewer than the 916 permits issued in May 2015. The number of permits issued this year through May is down 38.8% compared to the first five months of 2015 and is the lowest January-May total in the history of the TPI analysis.