Tag: Oil and Gas

Economic Impact of Colorado Mining Employment is Significant

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In October, the Bureau of Labor Statistics reported the Colorado Mining Sector employed about 35,000 workers, or about 1.4% of the state’s 2,534,600 wage and salary employees.

In 2014 the GDP for the Colorado Mining Sector was $19 billion, or 6.2% of the 2014 Colorado GDP. More importantly, the Mining Sector accounted for about 18.2% of the growth in the state’s GDP.

In a nutshell, mining employment is a small portion of total employment in Colorado. On the other hand, the industry makes a major contribution to the GDP.

The Oil and Gas Industry accounts for about 75% of the employment and GDP total.

With that as a background, it is easy to see why state leaders were concerned when the price for a barrel of oil plummeted to below $40 per barrel in a matter of months.

To make matters worse, the Bureau of Labor Statistics may have overstated employment in the Oil and Gas industry by as much as 4,000 workers. In other words, the data for the state does not appear to have measured the direct, indirect, and induced impact of lower employment caused by lower prices for a barrel of oil.

A quick analysis using IMPLAN shows the loss of 3,200 oil and gas workers and 800 support workers would result in a loss of $4.2 billion in economic activity and a total loss of 12,486 jobs. The direct average annual wages for the oil and gas industry are $96,425 and the direct average annual output per worker is $701,480.

The Bureau of Labor Statistics will update wage and salary data for 2015 in its benchmark revisions next March. At that point we will have a better look at the magnitude of the layoffs in the Mining Sector in 2015.

While we are anxiously awaiting the update, the reduction in mining employment is not a number we really want to see – it will be ugly!

mining impact

The Impact of Job Losses in the Oil and Gas Industry on the Colorado Economy

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About a year ago the Colorado Oil and Gas Industry was turned upside down. Almost overnight the price for a barrel of oil plummeted.

Since dropping, prices for a barrel of oil have remained low, rig count has dropped, employment has declined, BUT production has remained at record levels.  At some point the disruption will become more settled and Colorado will move forward with a smaller oil and gas industry.

Projected revisions to the BLS employment data for Colorado suggest the oil and gas  industry could be reduced by 1,000 jobs for 2015.  Although the industry is small from an employment perspective, it is significant in terms of gross domestic product for the state and MSAs. This is particularly true in Mesa, Weld, and Denver counties. Much of the drilling occurs in Mesa and Weld counties and many of the headquarters or company offices  are located in the Denver MSA.

The IMPLAN model is designed to show how changes in employment or sales could impact the state economy. In this case, the Colorado Labor Market Information group has produced projections suggesting there will be a loss of 1,000 jobs in the oil and gas industry for 2015. The IMPLAN model indicates this will cause an additional loss of 1,800 indirect and induced jobs. In addition there will be a combined loss of $657 million in direct, indirect, and induced sales in the Colorado economy.

To date the robust mix of industries in Colorado has offset the job losses in the extractive industries. That is likely to continue for the remainder of the year and into 2016.

oil and gas industry

 

 

Colorado Job Growth Continues to be Solid in April

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BLS recently released April wage and salary employment data for Colorado. The job growth is softer than expected given the strength of the U.S. jobs numbers, projected improvement in the growth of the economy (GDP), and the outlook of purchasing managers as measured by the ISM manufacturing and non-manufacturing indices. Given the strength of the U.S. employment data, it seems reasonable for the state to be ahead of last year by 70,000 to 75,000 jobs, even with the slight decreases in the state oil and gas industry.

job growth

In April there were 34,400 jobs (NSA) in the Mining and Logging Sector. This is down about 1,300 jobs from December, 2014 but about 1,800 jobs above the April 2014 total. The sector had record employment this past December.

Looking beyond the oil and gas industries we see that about two-thirds of the job growth this year has been in Health Care; Accommodations and Food Services; Construction; Professional, Scientific, and Technical Services (PST); and Manufacturing.

Approximately 21% of all jobs added were in Leisure and Hospitality. The tourism industry is important to all 64 counties in the state. Colorado had a strong ski season and is poised to have a strong summer season.

About 10% of total jobs added were in the PST, Manufacturing, and Information sectors. These sectors are the source of primary and advanced technology jobs. Primary jobs attract wealth from outside the state that is spent locally, they export a significant portion of their goods and services, and they often pay wages that are much greater than the state average.

Probably the hottest topic on the economic front has been the price of housing and rentals. The Case Shiller Home Price Index for Denver indicates that home prices increased by 10.0% over the past year and 1.4% on a month-over-month basis. Rentals have risen at slightly lower rates.

The comparative strength of the Colorado economy over the past five years has caused labor shortages in key occupations, i.e. it is necessary to attract talent from outside Colorado. Out-of -state workers from some parts of the country will experience sticker shock when they look at home prices in the metro area.

On a positive note, increased appreciation in home prices increases the “paper wealth” of individuals. This will cause home owners and landlords to remain confident in the economy and willing to spend money. The increase in prices, and ultimately property taxes, is a two-edged sword. Property owners don’t like the increase, but schools and local governments will see an increase in funding.

At the moment the increase in housing prices does not appear to have deterred job growth. Stay tuned – that may change! It will continue to be an interesting year for the Colorado economy.

Colorado Remains on Track to Add at Least 71,000 Jobs in 2014

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The state remains on track to add at least 71,000 jobs this year.

The BLS released their monthly employment report for Colorado earlier today. Rather than prepare a sector-by-sector analysis, the following comments evaluate the situation from 30,000 feet.

Colorado has had the perfect winter – snow in the mountains, but not so much that people couldn’t get to there to spend their money and ski. The state has had an excellent ski season which bodes well for hospitality industry employment. Good snow also means good rafting for the summer season.

A strong ski season also bodes well for the construction industry. Nationally, hotels and resorts had delayed repairs and expansions because of the recession. Upgrades and new construction that have been on hold are likely to occur in the months ahead.

A trip to DIA shows the importance of tourism to the state. Progress is being made on the Westin hotel located at the south end of the terminal. As well there are signs the light rail will soon be a reality. That will make it easier for travelers to connect to the metro area, which will further enhance Denver’s image as a place to hold conventions and conduct business.

It also appears the Gaylord project has cleared its latest set of hurdles and will begin construction soon. Shuttle drivers are anxiously telling their passengers where the project will be located.

The fact that Denver is on the short list for the Republican National Convention speaks to the increased reputation Denver is gaining as a place to host conventions. The fact that Colorado is a blue/purple state makes it an even more attractive destination. Wouldn’t the Republicans love to unseat the Democrats at a convention held in the Democrat’s backyard?

The snow and the cold of the winter season have not stymied construction along the Front Range. The state added over 10,000 construction jobs in 2013. Job growth has continued to be strong in 2014. Moving forward, the industry may be challenged to find sufficient workers, as unemployment in the industry has decreased substantially.

The construction industry will remain strong, with most of the growth coming from private sector investment. Despite improvement in tax revenues, the public sector is still not in a position to fund construction – such as schools or institutions.

Road construction has been held back by limited tax collections. One downside to improved fuel efficiency is less fuel is being consumed. The tax rates have not increased to support maintenance and repairs to our transportation infrastructure.

Residential construction will continue to improve, but will not approach the rates of growth that occurred prior to the Great Recession. For a variety of reasons, multifamily growth will remain strong. For example, young buyers prefer to live in the metro areas vs. the suburbs and many of them have high debt levels.

Obamacare enrollment has finally come to a close. For better or worse, the program is officially moving forward and healthcare organizations have greater clarity about how they can operate. They will be challenged by thin margins and will have to constantly be on top of their operations to remain profitable.

The industry continues to evolve rapidly. For example a focus for many organizations is bringing health care to local neighborhoods through urgent care and emergency facilities. The ACA will drastically impact the way healthcare organizations deliver services.

The oil and gas industry will continue to be extremely strong in Northern Colorado. In 2013 the state produced 64 million barrels of oil and about 80% was produced in Weld County. Colorado is one of the country’s top 10 states in terms of oil reserves. There are smaller counties that have enjoyed growth in oil production because of the Niobrara oil field, i.e. the industry is benefitting many parts of the state. Finally, the natural gas industry is strong on the western slope.

The state remains on track to add at least 71,000 jobs this year.