The significant decline in oil prices starting in mid-2014 has presented economic challenges for all states reliant on the oil and gas industry. However, the severity of these challenges has varied considerably among the seven states with substantial oil and gas sectors. This analysis examines recent economic indicators in these key oil and gas states, with a particular focus on Oklahoma, to understand how profession pay and overall economic health compare across these regions. We will explore how Oklahoma’s economic trajectory aligns with or diverges from states like Texas, North Dakota, and Wyoming, providing insights into the comparative landscape of profession pay and economic stability.
Broad Economic Indicators and Their Impact on Profession Pay
Seven states stand out due to the significant role of the oil and gas sector in their economies. In 2013-14, Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, and Wyoming all had oil and gas contributing over 8% to their Gross Domestic Product (GDP), exceeding 5% of personal income, and accounting for more than 3% of payroll employment (Chart 1). In each of these states, the oil and gas sector’s influence was at least 3.5 times greater than the national average. Among these states, Louisiana and New Mexico had the smallest oil and gas sectors, while Oklahoma, North Dakota, and Wyoming had the largest in terms of jobs and incomes, suggesting a potentially greater impact on profession pay in these latter states during an industry downturn.
*NAICS 211 + NAICS 213
Source: U.S. Bureau of Economic Analysis
Since July 2014, these oil and gas states have experienced diverse trends in total payroll employment, a key indicator of state-level economic performance and a reflection of the health of profession pay opportunities. Wyoming and North Dakota have faced substantial job losses, with employment decreasing by over 4% and 5% respectively (Chart 2). This decline likely translates to reduced profession pay and fewer job opportunities in these states. In contrast, Alaska, Louisiana, New Mexico, and Oklahoma have seen relatively flat employment levels. Oklahoma’s stable employment is particularly noteworthy given its significant reliance on the oil and gas sector for jobs and income, suggesting a degree of resilience in maintaining profession pay levels compared to states with job losses. Texas stands out with employment nearly 4% higher than in mid-2014, although growth has slowed in 2016. This indicates a stronger economy overall, potentially offering better prospects for profession pay growth compared to Oklahoma and other oil and gas states.
Trends in unemployment rates across these states further highlight the differences in job markets and the potential security of profession pay. Wyoming has experienced the most significant increase in unemployment, rising from 3.8% in early 2015 to 5.5% in April 2016. North Dakota’s unemployment rate has also increased, although its rate of 3.2% remains the lowest among oil and gas states, possibly indicating a tighter labor market and more stable profession pay for those employed. Louisiana and Oklahoma have seen similar increases in unemployment of about 0.5%, but Oklahoma’s rate remains relatively low at 4.5%. Meanwhile, unemployment in Alaska and Texas has remained largely stable, and New Mexico has even seen a decrease, albeit from a higher starting point. These unemployment figures suggest that while Oklahoma has seen a slight softening in its job market, it has fared better than states like Wyoming in maintaining employment and, by extension, profession pay levels.
Source: U.S. Bureau of Labor Statistics
Data on real GDP and real personal income, while less current than employment data, reinforce these trends and provide further context for understanding profession pay dynamics. Oklahoma again falls in the middle range among oil and gas states (Chart 3). The latest state GDP data through Q3 2015 show that most oil and gas states, except Alaska and Texas, had weaker real output growth than the national average, with New Mexico and North Dakota experiencing declines. Personal income data through the end of 2015 reveal that all oil and gas states lagged behind national income growth, particularly when excluding personal transfer payments. North Dakota and Wyoming experienced the weakest income growth, even year-over-year declines, correlating with their significant job losses. This income stagnation or decline directly impacts profession pay, indicating reduced earnings and potentially diminished economic well-being in these states compared to Oklahoma, which has shown more income stability.
Source: U.S. Bureau of Economic Analysis
Recent state tax revenues in oil and gas states also exhibit considerable variation, reflecting the diverse economic impacts and indirectly influencing public sector profession pay. Oklahoma has performed better than some states in revenue decline, but all have experienced decreases. While direct comparisons are challenging due to differing state tax structures, the decline in state tax revenues in 2015 and early 2016 was considerably more pronounced in Alaska, North Dakota, and Wyoming than in other oil and gas states (Chart 4). Texas has seen a slightly smaller revenue decline than New Mexico and Oklahoma, while Louisiana has shown some improvement in 2016. These revenue trends are important as they can impact state budgets and potentially affect public sector employment and profession pay.
Source: Census Bureau, State tax offices
Source: U.S. Bureau of Labor Statistics
Industry-Specific Trends and Profession Pay Variations
Analyzing trends across specific sectors within oil and gas states reveals both commonalities and differences that influence profession pay across various industries. A key similarity across nearly all oil and gas states is the significant decline in mining sector employment, primarily oil and gas in these states, down more than 18% since the previous year (Chart 5). Alaska is an exception with a 13% decrease. This widespread mining job loss has directly impacted profession pay within the energy sector across these states. The variations in overall economic performance, therefore, stem largely from the performance of other sectors. North Dakota’s particularly steep 32% drop in mining jobs has likely contributed to its weaker overall job market and greater pressure on profession pay in the state.
The performance of specific sectors in North Dakota and Wyoming has been notably weaker than in other oil and gas states, further explaining their overall employment downturn and profession pay challenges. Construction, and trade and transportation sectors have experienced sharp job declines in both states, possibly due to their stronger ties to the oil and gas industry. Additionally, leisure and hospitality jobs have significantly decreased in Wyoming, and North Dakota has experienced larger manufacturing job losses than all other oil and gas states except Oklahoma. These sector-specific weaknesses indicate a broader economic contraction in these states, impacting profession pay beyond just the energy sector.
Conversely, several sectors have shown similar trends across energy states. Financial and business services have performed worse nationally than in all oil and gas states, with only Texas and New Mexico avoiding outright job losses. Manufacturing job losses in all oil and gas states have exceeded the national average. Meanwhile, employment growth in education and health and in the government sector has remained relatively consistent with national trends in most oil and gas states, thus far maintaining profession pay stability in these sectors. However, recent declines in state tax revenues across all oil and gas states suggest potential future divergence from national trends in public sector employment and profession pay.
Source: FHFA
Housing price trends also vary among oil and gas states, reflecting regional economic health and indirectly impacting the real value of profession pay. Texas has again outperformed other areas, while Oklahoma ranks last among oil and gas states in home price growth, although all states continue to see year-over-year gains. Nationally, home prices grew slightly faster in Q1 2016 than the previous year, at 5.7% (Chart 6). Among oil and gas states, only Louisiana, New Mexico, and Texas experienced faster price growth, and only Texas had a higher rate than the nation, a shift from the previous year when four oil and gas states had faster home price growth. In Oklahoma, home price growth has slowed significantly from 6.2% to 1.3%, indicating a cooling housing market, which could moderate cost of living increases and somewhat offset slower profession pay growth.
Texas’s Economic Outperformance and Implications for Profession Pay
Texas has demonstrably outperformed Oklahoma and other oil and gas states in recent years, suggesting stronger profession pay prospects and overall economic opportunities. One contributing factor is Texas’s smaller manufacturing job losses compared to Oklahoma, likely because a smaller proportion of its manufacturing sector is tied to oil and gas. In 2013, 50% of Oklahoma’s manufacturing output was in fabricated metals, machinery, and petroleum and coal products, compared to 40% in Texas, indicating a more diversified manufacturing base in Texas.
More significantly, Texas has outperformed Oklahoma in several large service industries, including financial and business services, trade and transportation, and education and health. These three sectors collectively account for over half of all jobs in both states. Texas’s stronger performance may stem from robust job growth in its major metropolitan areas—Dallas-Fort Worth, Austin, and San Antonio—which are less dependent on oil and gas than Houston or Oklahoma’s largest metros (Chart 7). The most recent data show that mining sector employment as a share of total metro area employment was more than twice as high in Houston, Oklahoma City, and Tulsa as in Austin and San Antonio, and nearly twice as high as in Dallas-Fort Worth. This diversification in major Texan cities has buffered the state’s economy and supported broader profession pay growth across sectors compared to Oklahoma, where the economy is more concentrated and vulnerable to oil and gas fluctuations.
Source: U.S. Bureau of Labor Statistics
Source: TWR
Office vacancy rate trends in Texas and Oklahoma align with these metro job market dynamics (Chart 8). While national office vacancy rates have decreased, unleased office space has increased in Oklahoma City, Tulsa, and Houston. Conversely, office vacancies have risen only slightly in San Antonio and have declined in Austin and Dallas-Fort Worth. These trends further underscore the relative economic strength of major Texan cities and their capacity to support diverse job markets and potentially higher profession pay compared to Oklahoma’s more energy-dependent urban centers.
Conclusion and Outlook for Oklahoma Profession Pay
Oklahoma’s economy, despite its heavy reliance on the energy sector, has demonstrated relative resilience compared to many other oil and gas states during the recent oil price downturn. Current data on employment, GDP, and income indicate stable or only slightly declining economic activity in Oklahoma, with a moderate decrease in state tax revenues. This contrasts favorably with North Dakota and Wyoming, which, despite having similarly sized oil and gas sectors, have experienced steeper economic declines and greater pressure on profession pay. However, Texas has clearly outperformed Oklahoma across nearly all economic measures, suggesting stronger profession pay growth and broader economic opportunities. This is partly attributable to Texas’s somewhat more diversified economy, particularly in its major cities, which are less reliant on oil and gas-related manufacturing and more focused on business services compared to Oklahoma.
With Oklahoma weathering the economic downturn better than some states, the recent modest recovery in oil and natural gas prices in the second quarter of 2016 is timely. Oil prices are approaching levels that energy firms in the Kansas City Fed’s latest energy survey consider profitable, averaging around $51 per barrel in their active fields. Sustained prices at or slightly above this level could signal a potential end to the decline in the oil and gas sector and offer some stabilization for profession pay in the industry. While challenges remain for Oklahoma’s economy, including ongoing state government budget cuts, the state’s relatively stable economic condition—despite significant energy sector job losses—offers a degree of optimism for the near future and suggests a foundation for maintaining and potentially growing profession pay across various sectors.
