Monday, July 18, 2011

Energy and state employment growth

By May of this year, our ongoing economic recovery, which began in July 2009, had generated a net increase of about 637.4 thousand jobs nationwide. This paltry 0.5 percent increase in employment was not distributed evenly across the country. The stark differences beteween states can be seen within our own metro area: Missouri, which saw a net decrease of nearly 26 thousand jobs during the period, or a 1 percent decline, was among the laggard states, whereas Illinois, which saw an increase of 44.4 thousand (0.8 percent), performed better than average. 

Amazingly, a single state, Texas, accounted for 42.6 percent of the total net job growth in the country. Texas's job growth rate of 2.6 percent for the period was more than five times that of the country as a whole. Naturally, the governor of Texas, Rick Perry, has asserted that his pro-business (actually non-anti-business) policies are responsible for his state's outsized job generation.

While there is surely a great deal to Governor Perry's claim, another contributing factor lies in the fact that oil prices more than doubled over the period. Such sharp increases in oil prices tend to have positive effects on employment in energy-producing states such as Texas, while helping to depress employment in most others. (Sidebar: Coincidentally, I have a new working paper about this very thing.) The effect of oil is seen most starkly in North Dakota, which has been experiencing an oil boom for several years and saw its employment rise by 5.6 percent since the end of the recession until May, making it the state with the fastest job growth.

Given that many parts of the country are at the start of what looks to be a shale-based revolution in energy production, more states might be getting a similar economic boost very soon. Missouri and Illinios, however, do not lie atop any of the recently found exploitable shale deposits and will have to look elsewhere for their economic salvation.