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If the U.S. energy boom really is reshaping the U.S. economy, then the new shape sure hasn't come with a lot of jobs.
The Financial Times reported Monday that U.S. petroleum and coal exports over the past 12 months to June 30 totalled more than $110-million (U.S.), more than double their level of just three years ago. Energy is the fastest-growing segment of U.S. exports – a byproduct of the surge in U.S. oil and gas production thanks to the rapid expansion of shale drilling. U.S. crude oil production has jumped nearly 50 per cent in the past five years.
We don't have detailed data of the energy business's contribution to the U.S. economic recovery – the U.S. Bureau of Economic Analysis's most recent industry-specific gross domestic product break-out for the sector is from 2011 – but there's little doubt that such a rapid expansion in output and exports has been a significant net contributor to U.S. GDP growth. Indeed, it has been one of the brightest spots in the recovery.
Except when it comes to job creation.
U.S. Bureau of Labor Statistics data show that employment from oil and gas extraction has risen by a paltry 6,000 jobs in the past 12 months – just 3.4 per cent. Employment from the making of petroleum and coal products (refineries, etc.) has grown by just 3,000 jobs, or 2.6 per cent. If you combine the two, the industry has added a thin 35,000 jobs over the past five years – nothing close to its pace of expansion in production and exports.
Perhaps this is evidence of the industry's ability to leverage technology, rather than labour, to tap into previously untappable resources. Nevertheless, it's a reminder that all economic growth is not built the same – and as the U.S. economy evolves from its long-standing status as a manufacturing giant, the next sectors to take economic leadership won't necessarily deliver the jobs to make up for what has been lost. (Indeed, employment in U.S. manufacturing alone is down nearly 1.5 million in the past five years – roughly five times the size of total employment in oil and gas extraction and petroleum products.)
These numbers, too, help explain why the U.S. unemployment rate remains so frustratingly sticky at historically high levels (at 7.4 per cent in July), even as the economic recovery gains momentum. Some of the biggest traditional contributors to U.S. GDP – manufacturing, retail, financial services – are still running below their pre-recession levels. Some of the fastest-growing economic contributors – energy, health care, and more recently, construction – haven't been massive job creators.
This is part of the debate that goes on at the U.S. Federal Reserve Board every day, as the central bank looks to employment growth as a critical component to determining when, and by how much, it should unwind its extremely accommodative monetary policies. In the manufacturing-centric U.S. economy of the past, a sustainable unemployment rate south of 6 per cent – heck, even 5 per cent – might have been realistic. With a new set of industries poised to take leadership in the next economic cycle, those realities have changed.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe.
David Parkinson