Yesterday, during his conference call, in the context of the collapse in the US shale industry, DoubleLine's Jeff Gundlach said something [8]that we first noted over a month ago: that "all of the job growth in the (economic) recovery can be attributed to the shale renaissance." He was likely looking at the following chart from a Manhattan-Institute report [9]:
[10]
And while he added that if low oil prices remain, the U.S. could see a wave of bankruptcies from some (or most) leveraged energy companies which we also observed two months [11], there is a different and perhaps far more important tangent to the above chart.
Wages.
Because recall that now that the unemployment rate is an artificially low 5.6% thanks to a record number of Americans out of the labor force (all that would need to happen for the jobless rate to double is for 8 million of the 93 million American not in the labor force to return to it for whatever reason), the one key indicator that the Fed is focusing on, is average weekly compensation. And as those who followed last Friday's jobs report recall all too well, in December nominal wages saw their biggest monthly plunge in years.
So our question is this: if indeed the shale boom is now turning to bust, and if indeed the vast majority of jobs created were thanks to the shale revolution (which is about to go in reverse), what happens to the primary source of high-paying jobs: the energy sector?
Before you answer, take a look at the following chart, courtesy of the Dallas Fed.
[12]
