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Baker Hughes Cuts 17% Of Workforce As Oil Slump Ripples Through Economy
One thing we’ve been keen to point out whenever and wherever the occasion arises, is the vast and ridiculous discrepancy between BLS calculations of job losses in the oil & gas space and those reported by both Challenger and by the companies who are actually doing the firing. Through February for instance, the government reckoned that around 3,000 jobs had been lost this year in oil & gas exploration and extraction. That figure was just a "shade" lower than the 40,000 reported by Challenger:
Fast forward to the beginning of April when, in “Dear Texas, Welcome To The Recession,” we drew attention to the following rather ominous graphic which shows that the state which has until recently served as the country’s post-crisis job creation engine has suffered from 47,000 layoffs YTD, or more than three times the number of job cuts posted by the next closest state:

Finally, in “Job Cuts In Industries ‘Closely Related’ To Oil Likely To Triple,” we highlighted data from Goldman which shows that in past oil downturns, layoffs in sectors related to oil & gas were generally triple what they have been during the current slump, meaning that, in Goldman’s words “we should begin to see more of an effect in these other areas as well.”
Today, in the latest sign that depressed crude prices are likely to ripple through the economy for some time to come and in the process make the government’s unemployment figures look like even more of a farce than they already do, we learn that Baker Hughes has now increased the number of jobs it plans to cut from 7,000 to 10,500 (or nearly a fifth of its workforce) and the best (or worst) part is, that may not be the end of it. Here’s the statement:
During the first quarter we took necessary actions to reduce our cost base and resize our footprint to mitigate current market conditions. These actions include the closure and consolidation of approximately 140 facilities worldwide along with the idling or impairment of excess assets and inventory. Correspondingly, we made the decision to increase our headcount reductions to a total of approximately 10,500 positions, or 17% of our workforce, which is 3,500 positions higher than what we previously announced. Combined, these actions are projected to reduce cost by more than $700 million on an annualized basis.
Looking out to the second quarter, we expect unfavorable market conditions to persist. North America and international rig counts are projected to continue declining across most onshore and shallow water markets, which would further intensify the oversupply of oilfield services. We will continue monitoring market conditions closely and will take actions as necessary to optimize efficiency, while retaining the capacity to flex up when market conditions improve.
As for Richard Fisher's assertion that a negative outlook for the Texas economy premised on the decline in oil prices amounts to "bull droppings" (to use the PG-13 version of what he actually said), JPM is here to tell the now retired Dallas Fed chief that "unfortunately, the only thing dropping in the Texas economy is the number of jobs." Here's the note:
The Texas Workforce Commission recently reported that nonfarm employment dropped by a huge 25,400 in March, a decline the magnitude of which hasn't been seen since mid-2009 (see the chart below). To put that in perspective, the 0.2% drop in employment would be equivalent to a 304,000 monthly drop at the national level. The swing in momentum is particularly sharp, as Texas had been averaging job gains of 34,000 per month last year. The March decline follows a sharp slowing in January and February and has occurred alongside a big deterioration in Texas business sentiment. Moreover, the elevated level of jobless claims in Texas on into April suggests that monthly job losses could persist past March.
Job losses of the size Texas experienced last month are rarely seen outside of recessions. Looking at things from the demand side there are also indications the Texas economy may be near contracting. At the national level, cutbacks in oil & gas-related capex could shave about 0.5%-point from Q1 GDP growth. The Baker Hughes rig count (which is used by BEA to estimate this category of investment) indicates that just over half of the reduction in rig count has occurred in Texas. Given Texas' 9.2% weighting in the national GDP, this means oil & gas capex alone could be taking about 2.7%-points off of Q1 GDP growth in Texas -- a big hole to get out of to achieve positive growth.
Fisher's more optimistic prediction for the Texas outlook rested on its diversification into non-oil industries. The Texas economy is diversified, and is home to many world-class companies that have nothing to do with fossil fuels. So then what did Fisher get wrong? One doesn’t have to look farther than the Dallas Fed's own research for an answer. Shortly after the energy price collapse of 1986 the Dallas Fed estimated that every job lost in the oil and gas sector had a knock-on effect of another 2.6 jobs lost in various non-energy sectors – retail, hospitality, etc. It seems a similar phenomenon is at work in the current episode. In the industry detail table below you will see that the mining and logging industry (of which oil & gas extraction is a subsector) saw employment decline by 2,800. Retail trade alone suffered twice as many losses, down 6,600. A variety of other service industries also saw declining employment.
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cool...
now watch the Dow rally to finish positive for the day....
If anyone is shopping for used trucks, I am sure there are going to be plenty of lightly used F-250s on the market in Texas here before too long ...
Regards,
Cooter
What about oil rigs ?
I need a new tower for a windmill.
Thanks for the head's up, but only if there are 7.3L Powerstroke's available with under 200k miles. Anything newer is shit, and gasoline doesn't have either the shelf life or towing capacity...
You got that right, the 6.0 liter is just plain crap!
lower gasoline prices will be good for the economy. hahahaha
If you have the money may be time to buy a hot oil unit/truck soon.
Baker Hughes for sale!
Come and get it.
Who needs workers anymore. Just access cheap Fed money and buyback shares.
The laid off workers can become stock traders.
Work as a bankster/Wall Street or the government. It's where the money flows.
To steal someone else's line..."Ow, My Balls"!
wheres the guy from Texas that posted yesterday as a homebuiler he was killing it despite lumber collapsing???
im sure he'll be ramping up to the moon with the freshly laid off crop of soon to be EBT recipients......
Bullish indeed.
I read somewhere a few weeks ago vacancy rates are rising pretty fast in texas, esp Houston -- both apartment rentals and commercial and quite a bit of "multifamily construction" has slowed down considerably.
" Santa Ann'a Revenge. "
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Happy rig worker: "Oil is up!"
Unhappy former rig worker: "Order up!"
the sub-metrics dont add up to the macro reporting for so many economic indicators - the amount of rigged reporting is epic.
Then the mSM and CNBC compounds the echo chamber which creates more disbelief of so many other reported political / economic events
i have never seen so many things that can be proved to not add up
reduce costs by $700 million on an analized basis.
Shouldn't North Dakota be up near Texas?
Haliburton closed the Minot branch. 150 employees right there. ND is down 100 rigs from last year. Lets see..... thats 4000 workers. Others oil firms have layed-off 50 to 60% of their workers. ND officials are really quiet about this and are pretending and hoping things will come back. The Minot Airport is reporting boarding down 8% or so and the parking lots at the airport are 30 to 50 % empty now. Where as during the boom they were full all the time. Some one is not telling the whole story up here in Minot.
Nice summary F.E. Good to hear hard , in your face facts, aka reality bites.
market up yet....who doesn't love thousands losing their jobs and declining revenue!
Good paying jobs..this should make Obama happy...Global warming and all...
"increase our headcount reduction"
Heh.
Who cares what Fisher says? What's important is what Fischer says.
Ok, that's a start. Now take away their F-150s and then thier Webers. Thank 'goodness' and it's a truly poetic justice as those rednecks won't be able get foodstamps because they live in red states. F...them!!!
Don't be a stupid fuck, every state has food stamps red or blue and these guys are just working for a living, quit being a little bitch.
Tanks and Jets use a lot of gas. Just saying.
http://news.yahoo.com/unemployment-falls-just-23-us-states-hiring-slows-...
B-H gave the last company I worked for (started a new job a couple of weeks ago) a decent contract, late last year. Inconel shafts with magnet assemblies on them, for pumps they put underground to extract oil from old wells, basicslly sending oil from a horizontal pipe up to the surface.
I knew it couldn't last, plus with the global downturn, there's just not as much exploration, and opening of old wells.