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Job Cuts In Industries "Closely-Related" To Oil Likely To Triple, Goldman Says
A few days ago, in “Dear Texas, Welcome To The Recession,” we said the following about oil-related job cuts in the Lone Star State:
“While Challenger has found 'only' 37.8K energy-related layoffs in the first quarter, when broken down by state, things get bad for Texas, very bad. As in recession bad, because with 47K total layoffs, or 10K more than all energy-related layoffs, in just this one state so far in 2015, it means that the energy sector weakness has moved beyond just the oil patch and has spread to the broader economy and related industries in the one state that until recently had the best jobs track record since Lehman.”
Unfortunately for Texas and for any other state whose economy is tethered to anything energy-related, the knock-on effects of persistently low crude prices (which, as indicated by the fact that on-land storage capacity is well-nigh exhausted in the US, will likely remain under pressure) have only just begun to show up because as Goldman notes, job cuts for “closely related” industries typically run at three times the current rate in oil downturns, suggesting there’s quite a bit more pain to come. Here’s more:
Oil & gas-related employment has declined each of the last three months. We find that in previous oil-sector downturns, job growth in non-energy sectors that are closely related to the oil & gas industry--particularly certain segments of manufacturing and construction--has declined by three to four times as much as the decline in oil & gas employment itself. This means that in addition to the 10k or so monthly declines in energy-related jobs we expect over the next several months, we should begin to see more of an effect in these other areas as well. Over the remainder of this year we continue to expect overall payroll growth to average close to the current 197k three-month average, placing more of the burden on consumption-focused sectors to drive job growth.
If we are correct that weakness in oil-related employment will spill over into slower job growth in closely-related non-energy sectors, the burden will be on consumer-related sectors to produce a greater share of payroll growth than they have on average over the last several months. While this seems likely over the longer run, it does raise the possibility that the negative effects on job growth from slowing oil production, where the adjustment has been more immediate than expected, could be a bit more front-loaded than the employment boost from consumer spending.
So essentially, it's all up to retail hiring which is supposed to get a "boost" from consumer spending. This seems rather ironic because as we discussed last month, the correlation between wage growth and consumer spending is now close to perfect at 0.93 and if NFP data is to be believed (which it's sometimes not, but let's let that go for now), the only categories adding jobs are those where pay is generally low and as we've shown, "wage growth" is a concept that is now reserved exclusively for America's bosses. So in the end, if consumer spending is going to be the linchpin, all of that mythical wage growth better start materializing for the 80% of the workforce who is classified by the BLS as "non-supervisory".
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No worries, rig workers can build real shit, like guillotines...
Will something just blow up somewhere already?
Will something just blow up somewhere already?
I know, Right? My bunker food stash is getting past its shelf life date.
Walgreens plans to close about 200 U.S. stores as the nation's largest drugstore chain expands on a $1 billion cost-reduction plan it announced last August.
http://finance.yahoo.com/news/walgreens-aims-close-200-us-112421315.html
Moar Green Shoots.
If Walgreens shuts down stores, can CVS Caremark be far behind? You don't need a CEO getting paid a seven figure salary plus bonuses to fire thousands of people. Used to be, CEOs grew businesses. Not anymore.
American businesses used to be in business to make money,,, these days they save money. There is a major ideological difference between the two.
American businesses used to want skilled and knowledgable employees,,, these days they use lowest bid con-tractors which nets them the lowest quality.
American businesses used to have pride,,, these days their assets are in ruins due to the aforementioned reasons.
American Managers of businesses used to worry about the product,,, these days they worry about their next bone-us.
The whole country is in decay and IMO nothing can stop it from continuing except maybe a financial and common sense reset. 1st maybe,,, 2nd never.
Fuck Goldman
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
And these cuts will never be reported in any numbers. Once the lying starts, it can't stop.
http://www.bizjournals.com/houston/blog/drilling-down/2015/04/conocophil...
My employers has orders for engineered equipment for platforms - incidental to oil pumping operation. These are substatial dollars. Already much work and dollars invested. Small business already groaning under health care issues. Drip...drip...
Oops, sorry.
Wage growth, what a joke. There hasn't been any real wage growth in this country since Nixon cut the dollar from gold.
Worst job cuts since Lehman?
So.... a further drop in claims and a surge in NFP then. Got it. S&P and USDX to new record highs it is!
Peak oil, bitches.
http://uk.reuters.com/article/2015/04/09/uk-britain-oil-gatwick-idUKKBN0N00JU20150409
Well it's easy to boost "hope", as far as actually delivering oil, it isn't getting any easier...
I'm calling bullshit on GS. Down here in Texas we've been through this before and we'e spent a couple of decades really diversifying our economy and though we WILL get hurt, it won't be near as bad as what they think. The state to watch is California. If this drought follows into next year as is very likely, they will have to shed close to half their population in order to survive and their 'me first' culture will do very poorly.
GS is underestimating the job losses that will manifest because they don't want to frighten people into bank runs over the contagion. The bottom line here is that the USA is functionally bankrupt and so are _all_ the investment banks once the public gains knowledge of the trend towards bankruptcy. Frankly, the bank runs will manifest very soon IMHO. And I am getting ready to get in line at the bank to remove my money as soon as the first bank starts their run. After the first bank goes on a run there will be very little time left to bail out before all the banks go down en masse.
NOTE: All the banks in the World will go down on the next crash.
This is likely given most, if not all, American new oil production requires nearly $100 a barrel to show a net profit after all the debts are serviced. What people forget, or don't want to know, is that the fracking boom had only a handfull of firms that produced a net profit before the price collapse. The debt fueled drilling boom caused a massive debt overhang to build up over the frackers. $80 a barrel was enough for them to service debts, but not show any net profits. To turn and burn they needed $100 oil, to stay alive they needed $80 and anything under $75 was entering the danger zone.
Lets be clear, No New Cheap Oil Finds of Any significance have been made, they are all right at the top of the cost curve for production, thus the first to feel the pain when oil prices started down.
Jobs in American Oil and Gas are mostly way up the cost curve. It just makes sense that these folks will have to shut down. What keeps some of them pumping, is their debt obligations, as long as oil flows and debts are serviced, the companies at least can wait and pray for a quick rebound.
North Dakota and Texas were leaders in fracking for oil. Both oil patches will see the boom times over. And every oil worker kept another 2-3 people employed servicing his firm and his life style. Thats over, and so is America's last high paying blue collar job sector, outside of government and Law Enforcers.
Agreed that blue collar jobs are done for the oil patch, but you are forgetting the Pipeline jobs and they still pay good bucks and will not be shut down even if the price per barrel is even lower than it is now. Oil companies are in for the long haul and the subcontractors are short-term investors in comparison. England just announced a massive deposit of new oil that throws off peak oil estimates IMO. Clearly, the demand/supply equation is getting strange, but this is something GS has intentionally done to all commodities including steel/aluminum/copper/et cetera. If hyper-inflation is the name of the game it makes sense to hoard commodities and that's exactly what the anal hoarders in GS are doing until they crash the fuck out of the Russian Federation. The problem with this tack is that the Russian Federation knows this is exactly what the USA is up to and they are doing everything imaginable to counteract American influence. Frankly, the Russian Federation is in for the long haul as well and they are not about to conceed to the American Hegemony on anything whatsoever in the near or distant future. ERGO, the USA is going down-for-the-count in the long run of events played out.
Knuckle Dragger is right. I live outside of Houston, and shit is still going balls to the wall. Union pacific is replacing all railroad ties right now from Houston to New Waverly and south along 59 to Sugarland. These jerk offs always say shits slow no matter what. A lot of the lower players in the Oil & Gas bis are dumbass jerkoffs with some loot. Never have anything saved for a rainy day. I never thought I would say this, but last night I left zerohedge to find out some info about something on Yahoo.com. This student strike in Quebec should have been reported sooner, along with a few other things IMO.
From the armpit of the oilfield I can tell you this is getting very very ugly.