As we enter the second quarter, growth remains robust in the oil and gas sector.
Texas unemployment remains at near record lows
The Dallas Federal Reserve has released its 2018 first-quarter research and survey results of the Texas economy and Oil and Gas Sector. According to the latest figures, the Texas unemployment rate is at four percent, where it has consistently remained for the past three months. This unemployment rate is near a four-decade low. Texas employment expanded an annualized 4.0 percent growth rate in January and 3.2 percent in February. Employment and payrolls in almost all sectors and major metros have expanded through February. The labor market indexes continue to predict an increase in employment, wages and employee hours, with job growth primarily driven by oilfield services firms.
Oil and Gas job market tighter than ever
According to the latest reports from the Dallas Federal Reserve, the oil and gas sector of the Texas economy continues to be strong. At the end of February, there were 435 operating rigs in the Permian Basin and 70 rigs in the Eagle Ford play. The industry has grown an annualized 28.8 percent in the first few months of 2018, compared to a 12.7 percent expansion in 2017. The oil and gas sector added 3,900 new jobs in January, which is the most significant monthly increase since February 2017. The number of overall jobs number roughly 220,900, a result of 14 straight months of employment growth. Payrolls in the energy sector rose 16.6 percent in January, then skyrocketed 42.3 percent in February.
For employers, this means an ever-tightening labor market. In some places, such as the Permian Basin, employers face stiff competition for talent to fill the growing demand. Some executives expressed their concerns that the West Texas labor market is not only affecting hiring but also the availability of contract or third-party labor. 2018 is on track to be the first year since 2014 in which new hires will outnumber layoffs in the oil and gas sector.
Surveys were completed with 133 oil and gas firms executives on their outlook and opinions for the current and near-term prospects of the sector. Here are some of the personal observations they shared:
- “Increased activity in the Permian Basin, especially horizontal wells, has led to much higher prices for services firms and the unavailability of services at any price.”
- “Service companies are being overworked, and delivery of equipment services is more uncertain as utilization outstrips availability.”
- “The availability of service providers for conventional drilling is more limited than a year ago, which is creating some modest delays in our operations.”
- “Wages are growing more quickly than revenue, compounding the effects of decreasing working capital as accounts receivable are increasing causing liquidity to become the biggest problem.”
The survey results are optimistic when comparing company outlook for 2018 to the same survey quarter in 2017:
- 65% of executives reported an increase in business activity.
- 77% of executives reported improved company outlook.
- 35% of executives reported an increase in employment.
- 40% of executives reported an increase in employee hours.
- 52% of executives report an increase in employee wages and benefits.
View the full First Quarter Dallas Federal Reserve report.
Wherever you are in the Oil and Gas sector, The Daniel Group can help with your staffing needs.