For this edition of the Graph of the Week, I am stealing Tim Duy’s idea. Just as the oil and gas boom of the past decade has impacted certain local and regional economies, places like North Dakota and Texas among others, the plunge in oil prices in the past year is doing the same, but in reverse. Nationally, mining industry jobs are down some 50,000 since the start of the year and both North Dakota and Texas lost jobs in March. As such, we are starting to see the broader economic impact of the oil price decline appear in the data. Besides rig counts, industrial production or even manufacturers’ new orders, measures like initial claims for unemployment insurance have surged in some oil-dependent states.
While not good news in the near-term for these regional economies, as Tim has pointed out and previous work from the Federal Reserve Bank of Atlanta has shown, the economic costs of the oil price declines are upfront, while the boosts are longer term. In fact, the Atlanta Fed work showed that it wasn’t until 2015q2 in their modeling that lower energy prices would provide a boost to GDP, on net. While the soft economic data to start the year spreads further than oil and gas-related declines, most economists’ baseline outlooks call for not only continued growth, but some acceleration as well.