On average, we make about one non-trivial mistake a year. This year, the mistake we made is that we entirely missed West Virginia as a major oil producing state in our recent post covering new jobless claims and the hidden recession in the U.S.!
The following map from the U.S. Energy Information Administration showing where the major shale plays are in the lower 48 states reveals why we should have included West Virginia with the seven other states where hydraulic fracturing, or fracking, technologies have enabled large increases in U.S. crude oil production.
Updating our chart showing the number of new jobless claims filed in each of the eight major states that have seen large increases in their production of oil as a result of fracking technologies:
And now focusing in on the statistical trends in the number of seasonally-adjusted new jobless claims filed each week since global crude oil prices began falling after June 2014, without omitting West Virginia:
On the whole, the story is the same - the only difference is that the numbers are a bit worse than we had previously indicated.
Speaking of which, the WSJ's Real Time Economics blog featured the U.S. Oil Story in Seven Charts. Here's the most relevant section of the article:
The oil price crash has been rippling through the global economy since last summer. Now it’s hitting more corners of the U.S. economy.
Since mid-2014, the price of a barrel of crude has fallen by nearly half. That is offering a boost for American consumers–a net benefit to the overall U.S. economy–but constraining budgets at oil and gas companies.
The result so far has been big cuts in capital spending, layoffs and rising production.
The effects are showing up in more national economic data. The Labor Department last week said employment in mining, a category that includes oil and gas, fell by 11,000 in March. So far this year, the industry has lost 30,000 jobs, after adding 41,000 in 2014. Employment losses in the first quarter of this year have been concentrated in support activities.
The dropoff in employment makes sense in the context of a falling U.S. oil rig count, which is down for 17 straight weeks. At 802 at the end of last month, the number of drilling rigs–a proxy for activity in the industry–is down 36% from the October peak of 1,609.
This latter chart illustrates that the full magnitude of the reduction in jobs in the industry is much greater than than indicated by the new jobless claims data. That should be expected since about 84% of the people who work in the oil, gas and mining industries are employed as independent contractors rather than as employees, and are therefore are not eligible for unemployment insurance benefits.
And yet, the job losses in eight oil-producing states are large enough to move the statistical needle for their new jobless claims, indicating the impact of the fallout from falling oil prices is considerably bigger than the national employment data indicates.
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