No Bust Seen as Dakota Oil Firms Keep Staff Amid Price Drop
Post Date: Feb 06 2015
By Bloomberg Business
A plunge in global energy prices that has put some North Dakota oil rigs in a deep freeze has yet to chill the state’s hiring climate.
By almost any metric -- the jobless rate, payrolls, claims for unemployment benefits -- there is scant evidence to indicate the state at the epicenter of the U.S. shale-oil boom is about to stumble.
With memories still fresh in their minds of how difficult it was to find help, energy-industry employers in the fourth-smallest state by population probably won’t be quick to dismiss staff. Even those people who are let go may find their skills are transferable, filling positions to finish infrastructure projects long-delayed by a worker shortage.
“This won’t be a bust,” Harold Hamm, founder and chief executive officer of Continental Resources Inc., the largest leaseholder and producer in the Bakken shale play of North Dakota and Montana, said in a Jan. 28 interview with Bloomberg. “There’s plenty to do.”
At 2.8 percent in December, North Dakota’s jobless rate has been little changed since July and is the lowest of any state in the U.S. It had been as low as 2.5 percent in April, a record in data going back to 1976.
Its payrolls grew by 24,500 workers last year, or 5.4 percent -- the biggest percentage increase of any state.
Even over the past six months, when crude oil prices began to slide, payrolls in North Dakota have maintained an above-average rate of growth. Employment was up 2.4 percent from July through December, more than three times the 0.7 percent gain typical for the state over six-month periods during the U.S. economic expansion that ended in December 2007.
Job openings were up 17 percent last month from January 2013, according to data released Wednesday from the state’s labor department. There were 0.5 unemployed North Dakotans per opening in December, the latest month data were available. Vacancies have outnumbered the state’s jobless since June 2011.
Dismissals are also down. In December, 4,912 workers filed applications for unemployment insurance payments, 12.4 percent fewer than in December 2013.
“They want to retain their very best employees, anticipating a return to prior price levels,” said Michael Ziesch, manager of North Dakota’s Labor Market Information Center at the state’s labor department. “Even if things slow down somewhat, a plateauing or soft landing isn’t a bad thing -- it gives some of these jurisdictions a chance to catch their breath a little bit.”
A global oil glut that’s sent prices plummeting for months is testing those North Dakota businesses awaiting a rebound. The number of oil and natural-gas rigs operating in North Dakota as of Jan. 30 was 143, the fewest in more than four years, according to data from Baker Hughes Inc. Still, energy companies are pledging to stay the course.
“We’re going to be training people during this downturn and taking advantage of time to increase the intensity of training,” said Continental Resources’s Hamm.
He said staffing levels in North Dakota haven’t changed and he has no plans to trim his workforce there this year.
West Texas Intermediate for March delivery closed at $53.05 a barrel on the New York Mercantile Exchange on Feb. 3, down from a 2014 high of $107.26 in late June. WTI is up 19 percent from its Jan. 28 close of $44.45, which was the lowest since March 2009.
The drop in oil prices has been severe enough to trigger a self-correcting mechanism that may boost production by April, according to the state’s Department of Mineral Resources. Extraction taxes as of this month will be reduced by statute to 2 percent per barrel from 6.5 percent.
For some oil companies, the price slump could mean employees will transfer from rig operations to other projects.
“The state continues to pump a bunch of money into infrastructure, and those projects have been way behind,” said Andy Peterson, chief executive officer of the Greater North Dakota Chamber, the state’s chamber of commerce. “This will allow the state to catch up on some road building, bridge improvement, sewage plants, water plants, all kinds of things.”
State legislators are considering a $1.1 billion bill that would tap energy-related revenue to fund infrastructure needs in western North Dakota. The Senate passed the measure Jan. 29 by 44 to 2 and the House takes it up this month.
Bismarck, North Dakota-based oil producer MDU Resources Group Inc. is one company looking to allocate more workers toward its construction projects.
“In the construction business in the last couple years it’s been very difficult to find enough workers,” said Rick Matteson, the company’s communications director. “And in North Dakota, particularly with all the money that’s been directed toward the Bakken infrastructure growth, there’s just been a lot of work up there.”
In Watford City, where dirt roads connect drilling sites with a new Subway Restaurants sandwich shop and a hotel parking lot packed with rig-workers’ vans, the needs are evident. Other businesses, though, also are upbeat in the face of the oil-price drop.
“There’s always hiring” in this area, said Erin Hammel, general manager of the four-employee Anytime Fitness, which opened about four months ago. “We will of course need some more hands” when demand picks up, she said.
The demand for services to accommodate the influx of oil workers is far-reaching. In Fargo, on the eastern end of the state opposite the Bakken oil formation in the northwest, the labor market is about as hot as it gets: a 2.2 percent jobless rate in November that was even lower than the state average.
That earned Fargo the No. 2 spot in the “best job markets for 2015” as ranked by ZipRecruiter, an online job-search tool, which analyzed U.S. Bureau of Labor Statistics data.
Job Service North Dakota, the state’s labor wing that provides workforce training, has targeted five areas based on priorities outlined by Governor Jack Dalrymple. Of 318 workers trained in program year 2013, a plurality of 117 were preparing for jobs in the health-care industry.
For North Dakota, the challenge is keeping those workers who streamed in to take advantage of oil-industry positions paying better-than-average wages. As labor-market conditions improve in their former states, those “commuter” workers could find themselves being drawn back, said Ziesch, the state labor agency official.
At the end of 2014, the state had 476,200 people on non-farm payrolls, up 29 percent from 2009 and almost four times the 8 percent increase in the national workforce over the same period, according to Bureau of Labor Statistics data.
To be sure, Ziesch and his data-watching colleagues project there will be some loss of jobs in the energy industry, though it may not show up for another couple months, when it becomes easier to separate changes induced by the slump in oil prices from the influence of harsh weather, he said.
In the meantime, business owners such as Simon Chan remain upbeat about prospects. The Los Angeles transplant opened Basil, a sushi bar and Asian-fusion restaurant, in North Dakota’s energy-boom capital of Williston in September 2013. He decided to move there based on a tip from a customer after spending seven years in Casper, Wyoming, another oil boomtown.
Chan has a help-wanted sign in the window even after a 15 percent drop-off in business since December that was larger than the typical post-holiday slowdown. He said a couple of workers will leave soon for reasons unrelated to the oil slump, and wants to have replacements ready to maintain a staff of 20 so service and quality don’t suffer.
“Oil is just like stock -- eventually, with time, it’ll go up,” he said.
No Bust Seen as Dakota Oil Firms Keep Staff Amid Price Drop - Bloomberg Business