Oil patch job market still reeling from oil bust

Flared natural gas is burned at an Apache natural gas plant in the Permian Basin in Garden City, Texas.
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Flared natural gas is burned at an Apache natural gas plant in the Permian Basin in Garden City, Texas.

As the U.S. economy keeps churning out new jobs, the energy sector continues to lose steam after a crash in oil prices has put a damper on the oil and gas production boom.

But the impact is being felt unevenly in communities that rely heavily on energy jobs, according to a CNBC analysis of labor market data. While many energy-dependent counties have been hit hard, some have seen employment hold up surprisingly well, according to the analysis.

By just about every measure, the rest of the U.S job market is on a roll.

"The current robust pace of job growth is double that needed to absorb the growth in the working-age population," said Mark Zandi, chief economist at Moody's Analytics, after the release of the latest monthly private employment data from payroll processor ADP. "The only blemish in the job market is the loss of jobs in the energy sector."

Since oil prices began a steep dive a year ago, crude production in the U.S. has held up relatively well—even as once booming parts of the country have seen a sharp pullback in investment and new drilling. Since peaking late last year, the number of rigs in use has been cut in half, prompting many oil and exploration companies to lay off many of the workers hired during the energy boom that followed the Great Recession.

Between January 2011 and the end of last year, the U.S. roughly added 170,000 new natural resources and mining jobs, ADP. But since the start of the year, roughly 76,000 of those jobs were eliminated, according to the firm.

That trend is likely to continue, unless oil prices stage a surprise recovery. Industry analysts say that isn't likely as long as global crude producers continue to pump at current levels and surplus oil supplies continue to build.

Production managers in the oil patch say they've reduced hiring and expect to continue to do so, according to a survey of hiring managers by Rigzone, an energy industry news and information site. Roughly half of those surveyed said they have cut back on hiring in the last three months and another 13 percent said they had frozen staffing levels. Some 65 percent said they've cut back on hiring plans for the next six months, according to Rigzone.

Those cutbacks are clearly seen in the areas of counties with the highest concentration of energy-related jobs compared to the national average. (The Bureau of Labor Statistics designates employment dependence based on a "location quotient" showing the ratio of sector jobs to the national average. A location quotient of 2, for example, means there are twice as many energy-sector jobs relative to a county's labor force than the U.S. average.)

While the recent cuts have been severe, the boom in employment has left many energy-dependent counties in relatively good shape. In nearly three quarters of the 170 counties with more than double the average reliance on energy jobs, as of April 2015, (the latest data available), the county-level unemployment rate was still at or below the May national average of 5.5 percent.

Among the remainder with above-average jobless rates, many are in economically distressed regions where unemployment has been stubbornly high. Of the counties with a jobless rate of 8 percent or higher, seven are in Kentucky and West Virginia, where coal production has also been hit by a drop in prices.

The county with the lowest jobless rate—at 1.3 percent—was McMullen County, Texas, home to dozens of major oil and gas production and oilfield services companies. The county with the highest concentration of energy jobs, Washington County, Oklahoma, is the former headquarters of Phillips Petroleum, which merged with Conoco in 2002.