Shale development could realistically contribute a 3% annual increase in jobs in Pennsylvania through the remainder of the decade, according to research from Wells Fargo Securities LLC.
The 3% figure is one of the clearest projections to date on how shale development might influence job creation across Pennsylvania as the industry matures. Economists compared a modest outlook of future growth from shale to employment trends before the shale boom began and found an additional 250,000 jobs from shale by the end of the decade.
The economists said they didn't have the environmental or social expertise to determine whether that gain would be "worth it," but said 3% growth over eight years is "clearly a benefit." Considering employment from 1990 to 2011, the group found that job growth in shale country "does indeed have a statistically significant effect on employment growth in the other counties."
The natural resources sector is not a major employer in Pennsylvania but is "punching well above its weight," according to the report. The sector employs less than 1% of the workers in the state but has accounted for 8% of job growth between February 2010. By comparison, education and health care employ 20% of the workers in the state and accounted for one-third of job growth.
While employment trends in shale country and in the rest of Pennsylvania moved in relative lockstep between 2003 and 2008, they have diverged since shale development began in earnest: non-farm employment rose 5% on average in the 14 most prolific shale counties in Pennsylvania between August 2009 and June 2011, but rose only 1.6% in 53 other counties in the state.
Because those 14 counties are remote and account for only 10% of the state population, the employment figures don't offer a clear sense of the statewide impact of shale development. For instance, shale development appears to be having a much greater impact on job growth in Williamsport -- the small headquarters of the dry-gas corridor of northeastern Pennsylvania -- than in Pittsburgh -- the large headquarters of the wet-gas corridor in southwestern Pennsylvania.
If job growth continues at its current rate, the researchers project that non-farm employment in Pennsylvania would jump by 825,000, or 15%, through the end of 2020. Of that, shale country would add 165,000 jobs, 32%, and would induce another 400,000 jobs across the state.
That scenario, though, could easily be tempered by low natural gas prices and reduced operating programs, the researchers said. "The risk is that if gas prices remain depressed due to factors beyond just warmer weather, our optimistic scenario could prove to be, well, way too optimistic."
If job growth continues at its pre-shale levels, Pennsylvania would gain only 325,000 jobs through the end of the decade: 45,000 in shale country and 100,000 across the rest of the state.
The midpoint between those visions of the future -- "which may be the most realistic of our three forecasts," according to the researchers -- averages the job growth before and after the shale boom to project an additional 570,000 jobs by the end of the decade. Of those, about 100,000 would be in shale country and another 250,000 would be induced across the rest of the state.
While many studies have attempted to quantify the actual job growth associated with development of the Marcellus Shale in Pennsylvania, fewer have applied hard science toward modeling how the industry might shape employment trends in the state for the near term.
The studies to date have usually yielded controversy. A Pennsylvania State University study commissioned by the Marcellus Shale Coalition found that shale development supported nearly 140,000 jobs in 2010, but the Pennsylvania Budget and Policy Center counted only 19,000 direct employees in the core extraction industries (see Shale Daily, July 22, 2011; July 21, 2011).
An August 2011 report from the Center for Industrial Research Applications at West Virginia University found that the ripple effects of natural gas development could add around 250,000 jobs to the greater Pittsburgh region alone by 2020 (see Shale Daily, Aug. 18, 2011).