O&G Sector Tarnishes Strong US Jobs Report

The U.S. oil and gas sector bled away more jobs last month as sustained low oil prices forced energy producers to reduce spending, suggesting that further pain may be ahead for the struggling industry.

 

A roughly 50 percent drop in oil prices since June has pummeled the U.S. oil sector, prompting a quick drop in activity. The number of oil rigs active in the United States has fallen 40 percent since October.

 

The mining sector of the workforce, which includes oil and gas workers, fell by 9,300 to 844,500 last month, according to the Labor Department's February payrolls report on Friday, driven by a fall in oil and gas drilling activity.

 

The losses added to a 5,800 drop in January.

 

Jobs in the oil extraction sub-sector, which includes rig workers, dropped 1,100 to 198,300, adding to a 1,800 drop in January. Support activities for mining, which includes oil and gas workers, fell 7,400.

 

That made the energy sector a rare black mark in the jobs report, which showed nonfarm payrolls soaring 295,000 last month, beating expectations, and the jobless rate falling to a more than 6-1/2-year low of 5.5 percent.

 

Job losses in the oil and gas sector have been relatively modest since June, in part due the lag between falling crude prices and job cuts. But the last two months suggest the speed of the cuts may be increasing as prices remain depressed.

 

Past slowdowns suggest it takes time for job cuts to materialize. In 2008, during the financial crisis, jobs in the oil and gas extraction sector did not begin to fall until December, five months into the oil price slide. But once the rout started, it lasted for a year, wiping out over 50,000 jobs.

 

The signs are bleak. Oil drilling firms including Schlumberger (SLB), Halliburton and Baker Hughes already have announced plans to lay off ten of thousands of workers worldwide this year.