You are here
As Fed approaches rate hike, job growth shifts away from oil patch
[TULSA, Oklahoma] The rebound in US jobs, limited in the early part of the recovery to a handful of booming industries such as oil, has broadened across the country as old-line industrial areas such as Michigan and sun belt hubs like Florida pick up the slack.
A Reuters analysis of state-level data shows recovery in jobs has been spreading across the country and industries, helping offset the reversal in fortunes in some oil patch states.
Riding the shale oil and gas boom, Texas, Louisiana, Oklahoma and three other states made an outsized contribution to the labor market, adding a fifth of all new jobs created between 2013 and 2014 before a year-long crude price slide pushed the industry into reverse.
But when Fed officials meet this week they can take heart from evidence that other states and industries are gaining momentum, whether it is the surge of new manufacturing jobs in Michigan, a construction boom in Florida, or a tech-driven rise in business service employment in California.
That is likely to keep the Fed moving towards an expected interest rate rise in September, satisfying one of Fed chair Janet Yellen's key criteria: a significant improvement in US labour markets.
The Fed meets on Tuesday and Wednesday, and will release its policy statement on Wednesday afternoon. There will be no press conference or new economic projections in what will be the central bank's last meeting before the September session where a rate "lift-off" is expected.
Ms Yellen cited market turmoil in China and Europe and a negative effect of a slide in energy prices on US investment in recent testimony to Congress.
But she also been clear in her public remarks that she thinks a rate hike will be appropriate this year if the US economy remains on its present path.
The latest bout of oil market weakness could act as a drag on employment, investment, and the Fed's inflation target, Cornerstone Macro analyst Roberto Perli wrote in a recent analysis. "But pretty much everything else on the domestic side seems to have gotten a bit better," Mr Perli said.
For the first six months of 2015 employment grew faster than the working age population in 46 states, compared to 36 states a year ago and roughly 30 in the two years before that, an analysis of state employment statistics shows.
Jobs in construction, education and health, and leisure and hospitality have rebounded broadly over the past year, outpacing overall job growth in well over half of the states, according to Bureau of Labour Statistics data released on Friday.
In contrast, combined employment in six states that rank near the top in both oil and gas production - Texas, Louisiana, Wyoming, Colorado, New Mexico and Oklahoma - has now fallen for the past four months, according to BLS data. Those states account for just under 13 percent of the US population.
Oklahoma, for example, has lost about a tenth of energy sector jobs this year and more layoffs could outweigh gains in other industries. "Another leg down will be painful," said Chad Wilkerson chief economist at the Oklahoma City branch of the Kansas City Fed.
The decline has left workers like James Dutcher scrambling for a new foothold. Mr Dutcher, 28, was laid off last September from his US$18-an-hour job painting oil pump parts, and is now enrolled in a training programme in Tulsa to learn how to run computer-operated machine tools.
Fed officials say such "upskilling" benefits the economy as a whole. In the meantime, though, cases such as Mr Dutcher's could dent the labor force participation rate, sending somewhat mixed signals about the direction of the US economy.
Largely thanks to the oil boom, the rate has held steady over the past year, but dipped in June.
Still, tightening markets elsewhere offers evidence of diminishing market "slack". Government data showed that in 23 states, including the most populous ones such as California, Texas, New York, Florida and Illinois, the number of jobs is outpacing changes in the labour force That has yet to translate into the significant wage growth Fed wants to see as a sign that full employment is near.
But a recent Goldman Sachs analysis of state level data suggested wage pressures building across the country should outweigh emerging weakness in the oil states.