A brief comment on petro-states

I read this Op-Ed piece at Al-Jazeera the other day, entitled ‘The perils of petro-states: The case of Alberta’ (link: http://aje.me/1fjPONb). It goes on to compare the Canadian province of Alberta with Norway, contrasting the former’s success in managing its oil wealth with the failed promises of economic salvation in the latter.

This topic appeals to me for a number of reasons. I grew up in Norway and my father worked for an oil major my whole life, so arguments about Norway’s success have been quite personal for me, as I consider myself a fortunate beneficiary of it. Similarly, a number of my colleagues at graduate school were specialists in sovereign wealth funds and natural resources generally; one of my dissertation examiners, in fact, wrote a book on such funds. These conversations have been floating around my head for the last few years, and they are rather interesting.

I think the author makes a couple important points in the piece, and I would like to take it up in a little more depth. Suffice to say in the meantime I do not think the comparison between Alberta and Norway is at all justified. Norway is a sovereign nation (it isn’t even a part of the European Union), it controls its currency, and the geography is completely different (its oil reserves are in the North Sea). A more apt comparison would be between Alberta and Texas. Both are provinces, subject to a national currency, much of their oil wealth is pulled out of the ground. Both the US and Canada are members of NAFTA, so when the author of this piece tries to relate the losses in manufacturing jobs starting in the 1990s to the mismanagement of oil wealth, it doesn’t quite make sense. There needs to be a sharper attention to geography and economic history here.

In a future post, I’m going to riff on “petro-state” and try to formulate a regional alternative to it. I think, as a start, the definition of petro-state (“dependent on petroleum for 50 percent or more of export revenues, 25 percent or more of GDP, and 25 percent or more of government revenues”) is a little too dry. There is, as noted above, the scale issue: does this apply only to countries, or at sub-national scales? What sort of petroleum products are included in this, for instance (raw material exports or refined products)? Using employment, output, and tax revenue data (assuming I can locate it), I’m going to try to work backwards and see what kind of alternative definitions can emerge that take geography more seriously.

Meso-level analysis using cluster methods: local economic structure among Texan counties, part II

This post continues from the previous one, presenting the empirical findings from the cluster analytical technique.

The four independent variables I settled on as a way to investigate the local economic structure of Texan counties were: urban size, unemployment (rate), poverty (rate), and the share of oil and gas employment in total employment. This selection captures generalized urban economies that arise from large size as well as diseconomies (unemployment and poverty), and a degree of specialization (in an industry of some importance to the state). Unemployment and poverty, by the way, are very different phenomena. Unemployment does not necessarily imply poverty, and vice-versa. Unemployment refers to civilians of adult age who could be in the labor force but are not (perhaps because they are not qualified for available work, for instance). In contrast, individuals in poverty may be gainfully employed, except that they have fewer opportunities for social advancement, are socially ostracized, and their incomes are so low and posses so few material possessions that they have difficulty feeding and clothing themselves without assistance.

Local economic structure, thus, reveals in broad terms the allocation of economies and diseconomies from urban size and specialization. Once emplaced on a map, we may be able to determine the spatial structure of the economy as well. The rest of the post presents the findings from the k-means cluster analysis.

Cartographic introduction

Before diving into the cluster results, however, it is important to provide a more basic introduction to the geography of Texas. The first map below records the population distribution by county (absolute numbers). Consider that with the exception of the far west, counties in Texas are all roughly the same size. This curious feature makes it easier for us infer population density and hence urbanization from the following map. There are a number of important points to draw out here.

  1. Houston is the largest urban area in Texas, with more four million people living in the core county of Harris; activity spills out from Houston into at least four adjacent counties
  2. Dallas-Fort Worth is the next largest, with two heavily populated counties surrounded by less populated areas, ostensibly suburbs.
  3. Central Texas features San Antonio and Austin as part of a rather long chain of urban areas pointing towards Dallas, with San Antonio at the bottom of the chain, and Austin closer to the middle.
  4. Outside of the more densely populated eastern portion is the south, which include Corpus Christi and Brownsville.
  5. In the far west is El Paso, which is almost as much a part of New Mexico as it is Texas.
  6. Several counties are scattered throughout the panhandle, where there is oil and gas extraction.


I have also included a map of the distribution of the Hispanic population in Texas. I do this in order to head off any attempt to associate the location of Hispanic people and unemployment or poverty. In almost half of the counties in Texas, over fifty pct of the population are of Hispanic descent.


The feature that stands out most in comparing the total population and Hispanic population distributions is that the latter does not cluster in major urban areas. Instead, the main factor is proximity to the border with Mexico. This pattern stands in contrast, for example, to the distribution of black Americans in urban areas in the North during the last mid-century. Urban areas do not appear to be sites of particular concentrations of a given demographic group, in other words.

Finally, I present the results of the cluster technique described in the previous post.


There is quite a bit of information that needs to be parsed here. The first point is to note the frequency of each cluster group and their basic identities. The table below shows the frequency and the mean for each cluster group of the four dependent variables (population, unemployment rate, poverty rate, and share of oil and gas in total employment).

Cluster group Freq. Population Unemp. rate Poverty rate Oil and gas employment share
1 1 4,205,743 5.40% 18.63% 2.85%
2 34 31,413 5.29% 26.49% 1.14%
3 8 171,535 11.16% 32.08% 0.04%
4 25 208,060 5.19% 10.81% 0.94%
5 4 1,773,114 5.10% 17.97% 0.37%
6 58 16,835 3.46% 13.03% 4.63%
7 35 56,846 7.14% 20.75% 0.15%
8 89 39,826 4.83% 18.59% 1.02%
Total 254 100,199 5.14% 18.33% 1.70%

Cluster group 1 is clearly central Houston and cluster group 5 is the central areas of Dallas-Fort. Worth, San Antonio, and Austin. The next smallest group is cluster group 3, with 8 non-urbanized counties located along the border with Mexico. Cluster group 4 is the fourth smallest group, and it seems, based on the map, that these are suburban areas. It seems rather interesting that suburban areas of at least six metropolitan areas can be identified on the basis of the four dependent variables. This indicates there is uniformity in economic structure that relates to an area’s position within the urban hierarchy. All other cluster groups have memberships greater than 34 counties, the largest being the final cluster group (8) with 89 counties.

A glance at the map emphasizes that clustering is a common phenomena for almost all groups. This is especially the case for: group 8 in the central part of the state; group 7 in the eastern and northern parts of the state (a long chain of counties registering as 7 stretch from the border with Louisiana up to Dallas); group 6 in the panhandle and northwest of Dallas; and groups 2 and 3 along the border with Mexico.

For discussion, I think the most pressing question would be what are the differences between the most populated groups (particularly 2, 6, 7, and 8). Referring back to the above table, we can categorize those clusters as such:

  • Group 2 are small, poor areas with some oil and gas activity.
  • Group 6 are even smaller areas with low unemployment, relatively low levels of poverty and a substantial amount of oil and gas activity. Ostensibly, these counties observe an economic specialization in oil and gas extraction, and, being underpopulated, probably draw in skilled migrants for temporary work.
  • Group 7 counties are on average slightly larger than group 2 and 6 counties, but have higher rates of unemployment and poverty than group 2, which might be attributed to the very low presence of oil and gas.
  • Group 8 counties are slightly larger than group 2 counties, with slightly lower levels of unemployment and poverty, but also less oil and gas presence.

Obviously, we quickly encounter the explanatory limits of the four dependent variables. Thankfully, I collected more data than ended up going into the determination of clusters, so it is possible to fill out the analysis a bit more. Specifically, we can present the number of bank offices, deposits per capita, and median income. These indicators can reveal the financial characteristics of the clusters, such as access to financial services and accumulated personal savings. We should not necessarily expect that estimated median income will mirror deposits per capita precisely, for the reason that spending and saving patterns will vary between areas due to cost of living differences in addition to varying access to financial intermediaries. For instance, wealthier areas may hold their savings in 401(k) or brokerage accounts as well as bank deposits, while poorer areas may hold savings in cash. Other areas probably send savings back to Mexico in the form of remittances. So the financial indicators can raise some interesting hypotheses (again, cluster analysis does not manufacture evidence that allow us to make statements of causality; this is purely exploratory).

Cluster group Est. median income Bank offices Deposits per capita
1 51,298 1024 50,241
2 35,197 10 20,600
3 30,274 34 10,220
4 62,475 54 14,240
5 52,579 431 36,130
6 49,825 7 30,421
7 38,919 13 14,364
8 40,613 14 20,078
Total 43,815 27 21,209

I will take each cluster group in turn.

  • Group 1 is central Houston, which as a median income almost 20 pct greater than the Texan average as well as the most number of bank offices and the largest stock of deposits per person, almost equal to estimated median income. I should note anecdotally, by the way, that the major urban areas do not necessarily have greater deposits per capita than rural or other areas. This really is a matter of financial literacy and access, which in turn is structured very differently between regions and demographic groups.
  • Group 2, a relatively poor grouping, has the lowest average median income, the second fewest average number of bank offices, but its average deposits per capita is roughly in line with the Texas average.
  • Group 3, along the Mexico border, which also had the highest rate of poverty, has lowest average median income, and the lowest average deposits per capita. However, it has a high average number of bank offices. One might be tempted to say that the number of bank offices reflects remittance activity, except that most banks in the US do not offer this kind of activity, but rather face a number of non-regulated, pseudo-bank competitors (wire services). So, I’m not sure how to interpret that high number. It may be the case that these banks are unit (stand-alone) banks, unlike the nationally-recognized banking conglomerates, who would be unlikely to locate in such areas anyway, leaving a more competitive banking market.
  • Group 4, the suburbs, have the highest average median income yet one of the lowest levels of deposits per capita. Perhaps this reflects my statement earlier about wealthier households having access to a larger and more sophisticated range of financial products, which would mean they put fewer of their assets in bank accounts. Another alternative is that their wealth is accumulated in material things, such as residential property, fixed assets if they are business owners, and other ‘stuff’. Perhaps they finance their expenditures with debts and mortgages as well, creating financial obligations that draw their money away from savings and into regular interest payments.
  • Group 5, the urban cores, are also high income areas, with an exceptional number of bank offices on average.
  • Group 6, mainly in the panhandle, based on the low readings of poverty and unemployment, appear to be relatively successful rural communities. The median income in the average group 6 county is over ten pct greater than the Texas average, with a high level of savings (deposits per capita). Furthermore, this group contains the lowest number of banks offices, which suggests an uncompetitive but perhaps stable banking system.
  • Groups 7 and 8 are quite similar, featuring lower incomes, deposits per capita, and number of banks than the Texas average.

A final indicator I would like to include is total job creation. Here, I simply took the average quarterly number of jobs created (job gains less job destruction) between 2009Q3 and 2013Q3 for each county. As a point of reference, I also calculated job creation as a share of total employment, to account for urban size.

Cluster group Avg. quarterly job growth Job growth relative to urban size
1 17,484 0.90
2 78 1.15
3 273 0.70
4 556 1.15
5 6,750 0.85
6 87 1.65
7 122 0.74
8 97 0.87
Total 320 1.09

The main point from the job growth figures is that the greatest relative amount of job growth was happening in clusters 2, 4, and 6. Recall that these are, in fact, quite a disparate group: group 2 is one of the poorest in terms of work opportunities and high rates of poverty, while group 6 are major oil and gas centers. Group 4, meanwhile, the suburbs, have comparatively low oil and gas presence but are generally wealthier. It is likely the case that further disaggregation of job creation statistics would be necessary to determine the quality of these jobs.

That concludes my case study using cluster analysis. After completing posts like this, I often sit and wonder to myself, “Now, just exactly why did I do all of this?” The point, for me anyway, is that context is important. Given the major economic and political themes going on in the US right now–fracking, the uneven recovery, the ongoing foreclosure crisis, immigration, too-big-to-fail, the competitiveness of US industry–it is as important to know the location and context of such events in order to further our understanding of why these topics are important, to whom they are important (in the sense that some groups will benefit from certain kinds of economic processes while others will bear the burden of them), and the long-term ramifications. Eventually, I am going to revisit the posts I have written on Texas and the oil and gas industry and try and bring together some of my insights into how that industry is shaping the US economic landscape.

Employment update: losses and gains since 2007 recession

In yesterday’s “2:00 pm Water Cooler” links at nakedcapitalism blog (http://bit.ly/1u1lJ9u), Lambert Strether of Corrente blog (http://correntewire.com/) included a Bloomberg map (from September of this year) of the recovery of employment by state since 2007 (http://bloom.bg/1zM4rC5). Specifically, Bloomberg writers purported to depict the ‘uneven recovery in states post-recession’ by showing the ‘percentage difference between a state’s maximum employment in 2014 and its recession high (reached between December 2007 and June 2009).” They sought to highlight only those states where employment remained below peak levels during the recession, coded using a couple shades of red.

As Strether pointed out, it is a rather confusing map, and I don’t think it conveyed the information in the best way. Why construct a choropleth map that only color-codes poorly performing areas? Why focus on individual peaks in employment during the recession? It would make more sense to depict cartographically the employment changes for all the states and to select a uniform starting date.

Being convalescent following my recent surgery means I have plenty of time to create some terrible cartography of my own. My topic here is total employment changes at the state level from 2007 to 2013. Descriptively, the question is: which states bore the brunt of the recession in terms of employment losses and which have experienced a recovery in employment. Before going right for the States, I start by presenting the ratio of employment in December 2013 to employment in December 2007 for the Census divisions (of which there are nine). [All data was drawn from the Bureau of Labor Statistics (http://data.bls.gov/cgi-bin/dsrv?sm)%5D.


Recovery can be interpreted in a couple ways. First, it may refer to replacing lost activity, to the point that employment levels in 2013 equal those in 2007. Alternatively, recovery may refer to a kind of resilience. This term can indicate whether an area has returned to its pre-crisis trend, such that not only has that area recovered employment losses but it has added enough jobs that its employment levels are what would be expected had there not been any output losses. To calculate whether an area indeed was resilient and returned to a kind of equilibrium growth (or whether such a return is even possible!) is beyond my remit for the moment. However, the answer to whether an area is ‘resilient’ in this sense or not has much to do with whether there has been structural change in the economy (labor-saving technology, increases in productivity, further transition out of industry towards services). I highly recommend JK Galbraith’s new book The End of Normal for anyone interested in exploring this question.

As a point of reference, the ratio of 2013 employment to 2007 employment for the nation as a whole was exactly 1. The map (for the lower 48 states; Alaska and Hawaii are part of the Pacific division) shows that the West South Central states (Texas, Oklahoma, Arkansas, and Louisiana—major oil and gas states) performed best, with employment bases roughly six pct larger than they were in 2007. These can be deemed resilient. The West North Central (Great Plains states, where there is also quite a bit of fracking activity) and the Middle Atlantic (Pennsylvania, New Jersey, and New York) were second-best performing. The worst were the Mountain states and East South Central (Kentucky, Tennessee, Mississippi and Alabama), whose employment bases remained three pct below their levels at the end of 2007. These areas are clearly not resilient.

The next map depicts the above ratio of employment levels for all 50 states (maps not to scale). Clearly the Census divisions obscure some important differences within divisions, that is, between states. Census divisions do not always capture coherent economic-units, such as metropolitan areas or industrial districts, particularly in areas along and east of the Mississippi. A more apt unit of analysis for that would be the metropolitan statistical area, however these in turn do not necessarily have a single, coherent governing entity. As such, the US state, with different taxation regimes, varying receipts of federal moneys, bank regulation, local investment and labor force policies, etc, remains an important political-economic unit. The major takeaway, as I see it, is that resilient areas are either oil/gas producing (Alaska, North Dakota and Great Plains more generally, Gulf Coast) or are financial centers (New York and Massachusetts). Meanwhile, the diversified industrial and commercial economies of California, Washington, Virginia, Florida, Georgia, Pennsylvania, and New Jersey remain below their 2007 levels. That is just a hunch. From my academic research, other important factors include exposure to subprime mortgages and the foreclosure epidemic.


The next set of maps show change in employment for two-year increments beginning in 2007.I tried to apportion the states into quantiles, but there were quite a few shared values, and I also wanted to identify some of the outliers. The two-year increments correspond, more or less, with the most recent recession, then a nominal recovery period, and, perhaps finally, a stagnation period. These, incidentally, correspond to the stylized Minskiyan stages of the economic cycle (crisis/crash, recession, recovery, stagnation, economic boom, rinse, repeat). I won’t go into much depth here; I’ll leave readers to gander at these maps to their hearts’ content.




The maps, of course, rely on relative changes. I have also included below a table showing the ten states with greatest absolute employment losses from 2007 to 2009 and then the ten biggest gainers from 2009 to 2013.

Biggest Losers (from 2007 to 2009)
State Chg in employment (000s)
California -1,199
Florida -782
Illinois -409
Texas -403
Michigan -402
Ohio -401
North Carolina -329
Georgia -327
New York -288
Arizona -286
Biggest Gainers (from 2009 to 2013)
State Chg in employment (000s)
California 1,235
Texas 1,128
Florida 583
New York 546
Michigan 331
Ohio 291
Illinois 269
North Carolina 255
Georgia 250
Pennsylvania 230

Though the order in which these states appear varies somewhat, most of the states that lost the most employment also gained much of it back. The exception is Arizona, which lost over a quarter of a million employed workers but did not appear on the gains list. That state’s employment base grew by less than 170,000 from 2009 to 2013. In contrast, Pennsylvania lost close to a quarter of million jobs, but grew by 230, placing it at tenth in the gainer list.

In a previous post, I discussed the differences between employment and job growth. I emphasize here that I have looked at the stock of employed labor, not job growth. The quality of jobs is as important as the quantity, and job growth statistics provide great insights into employee turnover, job stability, and duration of employment. Additionally, I stress the importance of considering the sectoral component, which reveals comparative specialization and thus may indicate how an area is clued into larger financial networks and global supply chains. The utility of these maps is the clarity with which they can generate insights into the material distribution of burdens and benefits following the recession.

Employment update: the job creation meme II, the case of Texas

Note: this post was originally much longer, but WordPress failed me, and I do not wish to spend any more time on this.


In my last post, I discussed some preliminary reactions to one of the job creation memes that circulates in the popular press. In a nutshell, the contention is which groups or processes are responsible for generating jobs—businesses or consumers. Without developing a rigorous argument, I made three points. First, job creation statistics come from businesses reporting the number of employees they have on their payrolls. This point is important because not all workers are on a payroll (undocumented workers; sex workers; black market) and not all businesses accurately report payroll and employee data. So, we’re talking about a specific albeit large part of the economy—the formal, regulated parts, not necessarily cash-only businesses or grey/black market activities.

Second, businesses do not want to create jobs, for at least three reasons: hiring workers (tendering applications, interviewing applicants, training new personnel, etc.) is expensive (firing workers can also be expensive); it is not guaranteed to address its workload stresses; and, it may actually be based on faulty information about business prospects.

Third, ‘job creation’ is a sociological phenomena; we cannot observe ‘job creation’, but really only analyze statistics as they are reported to government agencies. These statistics are only part of the picture. There are qualitative aspects that reveal how job creation happens, such as which kinds of workers are hired (which may be structured by nepotism, cronyism, other forms of corruption, as well educational and skill levels; unionization may also be an important factor), or how businesses recruit and interview applicants (how much businesses spend on recruitment, how much workers spend to make themselves more attractive, through supplementary training, clothing, resume assistance, etc). The process of job creation itself creates costs and allocates those costs unevenly between workers and businesses depending on the characteristics of the company and industry. You could say that ‘job creation’ itself creates jobs, to the extent that human resource departments within companies and specialized recruitment agencies exist to facilitate the process.

Finer points

If you are going to report on job creation statistics, the least one can do is push further into the statistics and describe how the process is happening at lower levels of observation. On this note, there are several questions I would suggest are very important indicators of the nature and quality of job creation.

  • What kind of companies are creating jobs? Are they large/small; young/old; what is their ownership structure (publicly-listed, privately-held, S-corporation, partnership)?
  • What sectors of the economy are creating jobs (agriculture, business services, mining, manufacturing, retail, public sector, etc)? Under what occupational divisions can these jobs be classified (managerial, financial, engineering, legal, sales, administrative, healthcare, etc)?
  • How long do the jobs last? Are they seasonal? What is the rate of the turnover in the industry? If there is high turnover, is it the case that previously-fired employees are returning to old positions (like in manufacturing firms) or is there a regular churn of new employees (like in seasonal retail activities)? What are the job creation rates in high productivity, high value-added industries (such as business and financial services) as opposed to low productivity, low value-added industries? What role does job creation play in productivity and the cost structure of that industry?
  • How do job creation rates differ between similar scales of analysis, such as between major metropolitan areas or states? Within metropolitan areas or states, is there a difference in job creation between component areas (Manhattan versus Brooklyn; San Francisco versus Oakland; Los Angeles versus Orange; Dallas versus Fort Worth)?
  • How does the rate of job creation accord with demographic changes, such as the exit of retiring workers, the entry of new workers, in-migration, and the participation of women (who are more likely to leave the workforce for child-rearing, and possibly return for a variety of reasons)?

I think it is almost pointless to look at national-level job creation statistics for a country like the United States. The more interesting narratives come from specific case studies of industries at certain scales (metropolitan area, region, state). We know that the space-economy is characterized by clustering; the economy can be thought of as an amalgamation of production complexes linked together by networks of supply chains and business services firms. If you want to understand the prospects of a given area, then you must know how that area is inserted into the global economy, by way of its productive enterprises, business services firms, etc. I’m going to sketch out a map of job creation for the case of Texas, specifically its oil and gas sector, using job creation statistics from the Census to highlight the limits of that data. I also want to push past the tired cliche of “job creation” as driven by oligarchs or consumers by highlighting the larger geography in which all of these processes happen to look at the ramifications for workers and cities.

The case of oil and gas in Texas since 2009

I’m going to be as expeditious as possible and so I won’t be putting up comparisons of the oil and gas sector in Texas with other sectors. Suffice to state a few facts. First, total private-sector employment in Texas in the third quarter of 2013 was 9,292,884, of which 298,535 was in Mining, Quarrying, and Oil and Gas Extraction (NAICS 21). The sector is one of the smaller in the state, making up only 3.2 pct of private employment. (For the record, public employment in Texas is roughly 1.5 million). Within NAICS 21, there are three main sub-sectors: Oil and Gas Extraction; Mining (except Oil and Gas); and, Support Activities for Mining. We are mainly concerned with the former, which I focus on from now on.

Second, the Oil and Gas sub-sector employed 107,664 in 2013Q3, representing about 36 pct of the sector. In turn, in that year, companies established 11 years ago (the oldest firms) or longer accounted for 82.5 pct of employment in the sub-sector, however that figure has been declining since 2009Q3, when it was over 86 pct. The largest companies (more than 5oo employees) in this sub-sector employed 70 pct of all workers as of 2013Q3, which is almost two percentage points lower than their share in 2009Q3. That is, both younger and smaller companies must be growing at a faster rate than larger and older companies. It is noteworthy, however, that the oldest companies employ more workers in the sector than do the largest companies; in order words many older companies remain relatively small. Two pie charts below summarize the distribution of employees according to firm age and firm size in Texas as of 2013Q3.

image (1) image (2)

The main take-way from the difference in composition of the sub-sector in terms of age and size of its firms is that this is not an entrepreneurial sector. Start-ups, which are typically younger firms, do not constitute a large portion of employment. This should come as no surprise for this highly capital-intensive industry. Start-ups (young firms) are generally supposed to be the great job-creators, on average, in the economy as a whole. Just over 10 pct of employment is at very small firms (those with fewer than 20 employees), which is less than the average in the Texan economy. As a point of reference, for all firms in Texas, almost 15 pct of employment is contained within this size tier of firms. Similarly, almost 50 pct of employment is contained at very large firms across all firms in Texas. Within Texas at least, the oil and gas sector stands out for the greater than average proportion of employment that is organized within the very largest companies.

Let’s look at the distribution of oil and gas employment in Texas at the county level. Below is a choropleth map of sub-sector employment as of the third quarter of 2013.


There are perhaps five main production areas for oil and gas in Texas. The largest would be metropolitan Houston, in the south east, on the Gulf Coast. Harris County, where downtown Houston is, appears to contain almost half of the sub-sector. This tells us that quite a bit of the sector is in office work, because I doubt there is much drilling or refining in downtown Houston. The rest of the sub-sector is mainly located in and around Dallas (Exxon, for example, has its corporate headquarters in a Dallas suburb, though most of the managerial, planning, and oversight work of the company happens in Houston) as well as way up in North Texas (Amarillo), in West Texas (Odessa), and finally in South Texas (Corpus Christi, San Antonio). Most of all that is likely hydraulic fracking operations.

Astute readers will notice I still haven’t actually talked about job creation in oil and gas in Texas yet. One of my larger points is to emphasize the context of job creation. To do that, we should be aware of the basic organizational structure and geography of the industry under examination. However, as is clear from the above discussion, there are multiple indicators that could legitimately be used to describe job creation. I use ‘firm job gains,’ which counts the gains in employment (between beginning and end of a quarter) at firms that grew over the quarter, and ‘firm job lesses,’ which counts the losses in employment at firms that shrank over the quarter. So the former indicator does not include instances where firms fired employees or employees retired if that firm was growing. That is, employment losses at expanding companies are not counted by this indicator. The opposite situation holds for ‘firm job gains.’ The point of these indicators is to isolate job creation (that is, the formation of new permanent positions in firms, or the liquidation of previously permanent positions) as opposed to employee turnover or replacement hiring. These indicators are explained in brief at the Quarterly Workforce Indicator download site operated by the US Census Bureau (http://ledextract.ces.census.gov/).

The graph below depicts the quarterly net change in jobs in the sub-sector for Texas as a whole from 2009 to 2013. This is job creation less destruction. Bear in mind that these statistics represent flows, not a stock like employment.

image (4)

There are some key points. First, job creation is mostly greatest during the second quarter of the year. This makes sense as layoffs typically happen around Christmas and the New Year, and hiring begins in earnest in January. Second, the volume of job creation increased by roughly 80 pct between 2010 and 2011 (second quarters of each year), and about 20 pct between 2011 and 2012 (second quarters). It declined by over 10 pct from 2012 to 2013. It appears that job creation in the sub-sector has slowed, but remains quite high. The main point here is that the sector really did not begin to deliver gains to employment until after 2010.

The map above has suggested that we should look at job creation in the industry as it happens in specific areas. Houston appears to be the center of the industry, so we should start there. Below, I’ve compiled the job creation and job destruction statistics for oil and gas extraction in Houston (metropolitan statistical area) as a share of Texas job creation and destruction in that sub-sector.

image (3)

An important pattern that could be observed with job creation figures is whether or not convergence/divergence is taking place between areas. That is, it may be the case that rising diseconomies of scale at firms co-located in an agglomeration (such as oil and gas companies in Houston) or perhaps more general urbanization diseconomies (Houston itself) are causing firms to downsize operations or even relocate to other areas (say, to refinery areas in Beaumont or Port Arthur or to commercial areas in Dallas). The above graphic suggests that, for the first three years of the economic recovery beginning in the autumn of 2009, the oil and gas sub-sector in Houston captured a greater share of job destruction than job creation. This is not to say that there was net job destruction in Houston; in only two quarters did destruction of jobs surpass the creation of jobs within oil and gas. Rather, the point is that there was some convergence happening as areas outside Houston bore relatively less of the job destruction. In other words, roughly half the consolidation in oil and gas employment in Texas happened in Houston. This is notable because less than half the job creation happened in Houston during that period, and as roughly half the sector is located Houston, there is some discrepancy here.

More importantly, this process didn’t hold up for very long. If during the first three years that this sector was creating jobs (and I am sure we could assume was mainly related to fracking) most of this activity was happening outside of the industry’s central area, then once 2012 rolled around, job creation shifted back towards Houston.

Driving the process of convergence/divergence may be the evolution and maturation of the industry. The oil and gas sector can be divided into two main types of operations: upstream and downstream. The former involves discovery and extraction, and the latter involves transportation and marketing. It is intuitive that in the early stages of an economic boom in the oil and gas sector (fracking), upstream activities would expand first. As those projects are completed and go online, the emphasis shifts towards managing the projects, which ostensibly requires less although more specialized labor, and which can be accomplished off-site. As such, upstream activities probably require co-location with accountants, project managers, budget analysts, etc. There is a clear spatial division implied in the industry and in a boom.

Bottom line

A plausible explanation, then, of why job creation in the sub-sector shifted is the basic maturation of the industry. Placing job creation in its spatial context, then, has raised some critical points about distributional fairness but also, I suggest, about the durability of job creation. Here are some concluding points.

First, ‘job creation’ is much more than a conversation about the source of job creation, whether demand from consumers (demand from business, incidentally, is an ignored factor, even though such demand drives a lot of activity in trade and professional services) or from the benevolence of oligarchs. I think that conversations about job creation are impoverished and boring as they are currently. The more interesting aspects, I argue, are the industrial organizational and geographical aspects. From this angle, we can approach the quality and location of job creation, which implies distributional; matters.

Second, the data we have available on job creation do not allow us to answer those conversations about causes of job creation. They do, however, allow us to examine questions of distributional fairness. For example, the above statistics have pointed out that Houston is a crucial area for the reproduction of this industry. Yet, there is clearly a change in how Houston benefits, and I interpret the statistics as indicating that Houston has more recently distributed job destruction away. This is part of a larger story about the durability of the fracking boom and how this boom distributes benefits and costs. The data raise questions about job creation that are not part of the conversation, but which can be used to trace its potential trajectories in the future.

Third, I am not optimistic about its future trajectories, at least from the perspective of non-core areas. There is obviously a spatial component to the specialization of the industry, and as the industry matures, on-site operations will be streamlined. There is more here than simply demand for oil and gas. This is truly a matter of project management, budgeting, and contracts between oil majors and specialized providers. Fracking projects have a life span on average of about seven years, and are most profitable typically in the first two or three years. As the demand for labor on-site wanes and as companies begin to scale down or possibly enter bankruptcy, we might need to expect some financial turmoil in these peripheral areas. There could be consolidation. There could be stresses in the local financial networks, such as banks that finance commercial and industrial loans. There may be pressure on local spending and municipal tax revenues. Job creation may actually be a leading indicator of economic prospects.

A next step might be to perform a cluster analysis that identifies and isolates areas of fracking production (county or metropolitan scale) and then determines the extent to which job creation was shared between them. The timing of such changes would also be an interesting point. The cases of oil and gas specifically and Texas more generally deserve greater attention because Texas has captured so much of the employment growth since the nominal end of the recession and the fracking boom has been critical to its success. It’s development will have an impact on the US as a whole and certainly Gulf Coast area. We need to pay attention to this, examine the context of job creation, identify its locational attributes, and then we can speculate on the prospects of job creation. In this context, the source of job creation is only one aspect among many. The real questions cannot necessarily be answered by the data we have available, yet they do raise a number of other illuminating questions.

Nonetheless, left/progressive commentators should really cut it out with their thoughtless statements about job creation. Learn about which sectors are creating jobs, where they are creating them, and consider the context of those industries (namely production processes relations with other sectors, etc), and then maybe the conversation will take off.

Employment update: a work in progress

Inspired by infographics

Lying in bed this morning, browsing through my blog reader, I stumbled upon an infographic of the best-selling make and model of car in each US state. You see this type of infographic all the time, and they typically are attempting to argue that some kind of sub-national, regional patterns of cultural, social, and economic behavior exist. I enjoy these graphics, but they are generally not terribly scientific.

This gave me the idea to try to manufacture a map showing the largest sector by employment in each of the state. My hope was to be able to identify economic specializations, or perhaps even regional patterns. I was hoping there would be considerable differences. I visited the Quarterly Workforce Indicator (QWI) by the Census online (http://ledextract.ces.census.gov/) and for each state downloaded the first quarter 2012 employment at the 4-digit NAICS level, and then extracted the largest sector into a separate spreadsheet that would contain such information for all fifty states and the District of Columbia.

By the time I got to Colorado, I had to abandon my endeavor, or at least hit the brakes. The largest sector in the first six states was NAICS 6111–elementary and secondary schools. This sector was followed usually by NAICS 6221 (hospitals) or 7221 (full-service restaurants). This was not what I expected, although it seems intuitive now. Nonetheless, I think that in itself this is interesting. Oddly enough, even though I see them everyday, it never occurred to me that schools and hospitals would take up quite so much employment. Of course, the QWI, classifying employment according to NAICS, does not suggest anything about occupational structure, just the type of economic activity that those employed are engaged in. So, hospitals employ lots of people, but the NAICS cannot tell us what the division within hospitals looks like (doctors, nurses, administration, custodial, etc), just the number of workers in them.

As I wanted to identify differences between states and regional specializations, I returned to the QWI and selected only for private-sector employment. I also retreated to the three-digit NAICS level, sacrificing a layer of specialization. This, again, was mostly exploratory, so I just looked at the first five states. In the table below, I show the top five three-digit NAICS sectors by employment in these five states.

NAICS Employment
Food service and drinking places 132267
Administrative and support services 94136
Professional services 93134
Ambulatory health care services 84443
General merchandise stores 62209
NAICS Employment
Food services and drinking places 17779
Ambulatory health care services 16302
Professional services 14606
Hospitals 12020
General merchandise stores 10442
NAICS Employment
Administrative support services 192147
Food services and drinking places 179828
Ambulatory health care services 138116
Professional services 122605
Hospitals 79049
NAICS Employment
Crop production 75732
Animal production 48223
Forestry and logging 46388
Fishing, hunting, and trapping 43540
Support activities for agriculture and forestry 42925
NAICS Employment
Professional services 1080843
Food services and drinking places 1044787
Administrative support services 829147
Ambulatory health care services 660011
Hospitals 383284

In all states except Arkansas, the largest (private) employers are generally the health care system, restaurants/bars, professional services and administration support, and merchandise stores. Arkansas (finally!) is quite different–all agricultural activities.

I think the next step for me is actually to return to something I did in my doctoral dissertation, which is to compile the sectoral employment data into an index that shows the divergence of a state’s employment profile from the average. That is, it indicates the extent to which the employment profile in an area diverges due to specialization in sectors. An index like that can summarize quite a bit of information, yet it is also vital to include what those specializations are as the index is incapable of revealing that. That will be the next step, which will be in a forthcoming post.

Employment update: Texas employment growth

There is nothing I enjoy more than reading through spreadsheets of employment data. And I am certainly not being sarcastic here, this is the life of a nerd.

Part of the reason I enjoy reading through them so much is that when you deal with sector-level classification schemes (the North American Industrial Classification System, NAICS, is the one with which I have the most experience from my graduate work), you encounter some very funny occupations. They are funny, on one hand, because so many occupations are activities that you though were obsolete already, and there is something a little funny about the past (buggy-drivers, for instance, are a little funny; see what I mean?). On the other hand, they are funny in the way that bureaucracy is funny, like what you would read in Kafka or see in Terry Gilliam movie. Bureaucrats are uptight and fussy, which is pretty funny when you think about it; and you definitely get a sense of that fussiness reading through these spreadsheets.

As a short example, I’ve got in a figure below the ten industry sectors that grew the most in terms of employment in Texas from the third quarter of 2009 to the third quarter of 2013, and the ten sectors that contracted the most. This is mainly due to the influence of the book I am currently reading at the moment, Rough Country by R Wuthnow about the role of religion in Texas history. I am routinely sidetracked by my thoughts while reading, and this blog post follows one of the occasions.

Here are the largest contractions.

Contracting Industries NAICS Emp 2009 Emp 2013 Chg
Funds, Trusts, and Other Financial Vehicles 525 8356 78 -0.9906654
Electronics and Appliance Stores 443 38704 5352 -0.8617197
Rail Transportation 482 74 46 -0.3783784
Private Households 814 21290 16544 -0.2229216
Motion Picture and Sound Recording Industries 521 2026 1584 -0.2181639
Broadcasting (except Internet) 515 22571 18789 -0.1675601
Administration of Human Resource Programs 923 36668 32386 -0.1167776
Printing and Related Support Activities 323 29100 25732 -0.1157388
Apparel Manufacturing 315 4894 4370 -0.1070699
Publishing Industries (except Internet) 511 44231 40151 -0.092243

Some comments. I find it hard to believe the figures for 525; this must have something to do with counting error, which I’ve encountered a few times elsewhere in NAICS statistics. Second largest drop: electronics stores. That’s RadioShack, I guess. What’s incredible is the drop: from 38 thousand to five thousand! That is low-skilled service work after all, so ostensibly those workers can find jobs in other retail activities, although that isn’t much of a consolation. There are five thousand fewer people working in private households, so it seems that the wealthy have cut back on their excesses, out of solidarity with the working classes no doubt. Also four thousand cut from Administration of Human Resource Programs; so the rationalizers were rationalized. Printing also by four thousand. This classification is a little ironic; as printing of papers declines, printing of materials is growing (3-D), but it really seems to be evolving into just another large electronic item you would buy for your house, like a washing machine or entertainment system. Finally, Publishing Industries (except Internet) also declined by about four thousand. Several sectors include the “excluding the Internet” qualifier; economic history in the making.

Here are the largest positive employment changes.

Growth Industries NAICS Emp 2009 Emp 2013 Chg
Fabricated Metal Product Manufacturing 332 116206 138366 0.1906958
Oil and Gas Extraction 211 89965 107668 0.1967765
Securites, Commodity Contracts, and Other Financial Investmens and Related Activities 523 49272 62066 0.2596607
Machinery Manufacturing 333 86382 109960 0.2729504
Truck Transportation 484 104578 134310 0.2843045
Forestry and Logging 114 415 535 0.2891566
Wholesale Electronic Markets and Agents and Brokers 425 58507 75664 0.293247
Support Activities for Mining 213 100794 177155 0.7575947
Sporting Goods, Hobby, Book and Music Stores 451 39248 72612 0.8500815
Postal Service 491 325 856 1.633846

Some comments. These are mostly big industries. I notice that Texas has a lot of people in manufacturing (about 130 thousand in fabricated metal and another 100 thousand in metal machinery). It sure has an enormous pool of skilled labor, which is even more interesting in the context of it being a right-to-work state; how many of these workers are members of a union? What are their wages? What is the level of labor turnover? Oil and gas extraction as well as mining support together make up over another quarter of a million workers; all growing after crisis by significant amounts. Yet another very large sector with skilled and highly regulated/licensed labor is truck transportation; obviously on account of US trade with Mexico and the great amount of industrial production. The securities sector has also expanded by leaps and bounds, in the wake, oddly enough, of a major financial panic. I suspect mostly this labor is located in Dallas and perhaps Houston. Maybe this has something to do with fracking as well, as big oil is hugely preoccupied with risk management through financial markets. Fracking boom in Texas may translate into risk management boom as well. FInally, I am slightly relieved by the expansion in Sporting Goods, Hobby, Book, and Music Stores–hopefully the workers displaced from Electronic Goods Stores have found their way into these stores, which hopefully will enjoy a long life. Unless Amazon wipes them out first.

In short, quite a story of economic success. These figures give an interesting insight into why Texas has prospered after the crash. That story still needs to be developed.

I place a lot of value in government statistics like employment figures because as an undergraduate, I majored in Near Eastern archaeology. Being able to read into the lives of past civilizations is so worthwhile; you get such a sense of that when you have an idea as to what people were doing and how they were organized. It’s hard to make historical employment and economic figures interesting, but economic history is fascinating.

Studying phenomena at the meso-level

I’m currently reading Rough Country (http://www.amazon.com/Rough-Country-Americas-Powerful-Bible-Belt/dp/0691159890) by Robert Wuthnow. I’d like to highlight a couple things that I think make this a unique study and that sets an example for the kind of analysis that I aspire to.

First is the focus on Texas. The state is both an official jurisdiction but also a coherent region. It has a set of cultural, economic, and political institutions that have been shaped by its geography and history, it has several major urban areas, and it has its noted ecology. Yet it also presents an opportunity to examine the development of American history and its institutions as well. So, it presents a case study from which to deduce wider, national-level trends (beyond the valuable information on Texas).

Furthermore, he writes that an important “interplay [in his analysis] casts regional independence and personal autonomy against national identity and incorporation. The shifting definition of the region itself … emerges as a continuing theme” (pg. 7). This is a crucial venue for geographical study, as there is more to a ‘region’ than simply its official boundaries, but rather its interactions with peers and interactions with national trends, to say the least.

Second is the explicit focus on meso-level phenomena. In the words of the author: “The argument is rather about a series of processes that happen in distinctive ways and yet illuminate aspects of the relationship between religion and society that are best seen as this intermediate level of social organization” (pg 7). That is, his central object of study is the church (in the abstract), but more specifically the congregations and pastors in communities, and also the supporting structures such as religious conventions and higher-level organizations within specific denominations. He continues: “One of the processes derives from the ordering, chaos-reducing, nomizing role that nearly all discussions of the relationship between religion and society have emphasized” (ibid, italics original). So, the analysis is concerned very much with institutions in the most traditional sense–the incentives and discourses that guide behavior.

In academic geography (and perhaps other fields), you don’t often come across mid-level studies like this. Typically, case studies are concerned with organizations in specific places (a firm, a city, maybe a sector), and this occasionally can scale up to a more regional-level. I have not read much work that combines a thorough historical and geographical analysis of (1) a coherent region and (2) its institutions. Some examples of regions that deserve more study that come to mind but that also cross multiple official boundaries include Federal Reserve districts, large and varied ecological zones (Great Lakes, Gulf Coast), border lands (Mexico-USA), and metropolitan areas (often MSAs do not reflect a single municipal jurisdiction). Examples of mid-level institutions include police agencies, financial markets, banking markets (also cross multiple jurisdictions, in the USA at least), commodity supply chains (which get a lot of attention in geography), or federal agencies (those with branch structures, like the Social Security System or the Post Office).

My aim is to write up thoughts as I get through the book and how it is shaping my thinking on institutions, designing methodology, and the ‘meso-level’ in general.