As oil and gas industry economist, Karr Ingham knows it’s easy to have a busted crystal ball.
Take a prediction he made at the first of the year — that’s when Ingham thought the recent oil bust would result in about 40,000 jobs lost in Texas oil and gas fields.
But Ingham estimates job losses, by the end of October, had already hit 56,000, leading him to believe that they will hit at least 60,000 by the end of December. Not great news, he admits.
“Back in January, I estimated about 40,000, maybe as high as 50,000, in job losses and we are in excess of that now and we’re not done and it’s going to get worse,” said Ingham, an Amarillo-based economist who works for the Texas Alliance of Energy Producers.
To be fair, Ingham is not the only one with a dire outlook on the oilfield’s immediate future. Last week attorneys and investment bankers at a seminar hosted by the Haynes and Boone law firm said energy’s “day of reckoning” may be in 2016. They predicted companies will have trouble staying afloat financially.
We’re not done and it’s going to get worse
Karr Ingham, energy industry economist
That viewpoint was backed by a survey showing a growing consensus that lower commodity prices will be around for the next 18 months, not so happy news made even worse by bank regulators stepping up pressure on lenders about energy loans.
Ingham bases his gloomy employment forecasts on two sets of data from the Texas Workforce Commission: monthly employment statistics along with the agency’s quarterly census of employment and wages.
He said the monthly employment stats put job losses at 30,000 from December to September. But when you take into account what the census shows, which is calculated at a county level, the industry slashed about 48,000 jobs between December and June.
“Since then, we’ve had another four months in which jobs were almost certainly lost,” he said.
He said at its peak, the energy industry employed about 306,000 in December. Now, he said, employment is in the neighborhood of 250,000. If the decline continues the numbers could reach levels “you don’t like to say out loud” when predicting the future.
If there is another half year of contraction, albeit at a slower rate, the state could lose up to 70,000 jobs by the time things stabilize, which he hopes will be the middle of 2016. To Ingham, stabilizing means oil prices would rise to the mid-$40 range to stop the rig count and job declines. An increase to $60 a barrel would mark a meangingful improvement, he said.
But he quickly adds, “this is just guess work.”
“Crystal balls are nefarious under the best of circumstances.”
Max B. Baker