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Fracking and Job Growth

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The National Journal is out with a long article that attempts to shed light on the number of jobs created by hydraulic fracking in Pennsylvania:

Fracking creates jobs.

That’s the linchpin of the oil and gas industry argument for permitting the controversial drilling practice. And it’s become the industry’s trump card as the debate rages—among policymakers and scientists—over whether fracking is safe for the people and environment around it.

Getting an exact count of how many people collect paychecks as a result of fracking, however, is more art than science, and in many cases—particularly when it comes time for industry backers and politicians to tout the practice—a close look at the numbers shows that some of the largest estimates are based on the most generous economic assumptions.

It isn’t particularly surprising that politicians like to use inflated numbers that help there case. Nor is it surprising when opponents of fracking, mining, drilling for oil, etc. use figures that represent the most pessimistic view of whatever activity they are trying to ban.

So what does the author say?

Corbett’s campaign proclaims in a television spot that the Marcellus shale natural-gas industry is supporting over 200,000 jobs. But according to the Pennsylvania Department of Labor and Industry, just over 30,000 people were employed by industries directly tied to the fracking boom in the third quarter of last year.

So what explains the 170,000-job gap between Corbett’s campaign and his state agency calculation?

The 30,000 figure is the state’s estimate of jobs that are closely connected to natural-gas production in the Marcellus shale—a tally that includes employment in fields like natural-gas extraction, well drilling, and pipeline transportation.

The state also provides another, broader metric of shale-related jobs. Instead of counting jobs in core Marcellus shale industries, it calculates employment in the larger natural-gas supply chain. The total for this category comes to 214,946 jobs in the third quarter of last year.

That’s the figure Corbett is relying on for his ad, his campaign confirmed.

But the number was never intended to come without caveats. It covers industries whose connection to oil and gas development is tenuous at best, ranging from freight trucking to highway, street, and bridge construction. And agency officials openly admit that the figure—when used to estimate jobs supported by shale—amounts to little more than a guess.

The author seems to be questioning a politician for using employment numbers developed by a state agency. I had assumed that the numbers here would have been developed by a third party consulting agency which may have had a conflict of interest.

Large increases in economic activity have spillover effects outside of the immediate industry. You can see that very notably right now in North Dakota. In areas where the oil boom is most prevalent the unemployment rate is close to 0 percent, and even traditionally low-paying industries like the fast food industry are having trouble recruiting workers and have had to massively increase pay:

Even those not in the oil businesses are making more money. The population increase means more demand so the local McDonald’s and Walmart are hiring workers starting at $14 an hour, and many times they add a healthy signing bonus just for agreeing to work there.

The problem is it’s really hard to tell which of these jobs are due to the oil or gas boom and would not exist without it. So you get vague estimates from models because that’s the best you can do. It’s clear that fracking has generated significant economic activity and added many high paying jobs, but the example from Pennsylvania demonstrates it’s hard to get exact figures. This shouldn’t be a knock on the industry.

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