Rising Natural Gas Prices Responsible for Construction Job Growth
Governor Justice made a headlines last week, citing the latest employment figures showing that West Virginia led the nation in construction job growth in 2017. While the governor took the numbers as a sign that his job rocket ship is ready to launch, a closer look at the numbers shows that the recent growth has little to do with any policies in the state, and more to do with rebounding natural gas prices.
West Virginia did see a sharp increase in construction jobs in 2017. Total construction employment in the state increased from 29,900 jobs in December 2016 to 34,400 jobs as of February 2018, with most of the growth happening in the later half of 2017.
What type of construction jobs were added to the state's economy last year? Were they residential construction, commercial, roads, or other infrastructure jobs? Using quarterly data, while delayed, will let us see what type of construction jobs have been added in the state. And it turns out, at least through the third quarter of 2017, oil and gas pipeline construction accounted for all of the construction jobs added in the state, growing from 1,791 at the end of 2016 to 5,130 in 2017:Q3.
The growth in oil and natural gas pipeline jobs is tied very closely to rebounding natural gas prices. After a recent slump, natural gas prices began rising in mid 2017, right around the same time that oil and natural gas pipeline jobs started growing. And in fact, most of the growth in jobs was simply regaining jobs that were lost during the most recent decline in natural gas. Since the advent of the Marcellus Shale boom, oil and gas pipeline construction jobs have tracked closely to the volatile price of natural gas. Jobs spiked in 2008 and 2012 with a spike in gas prices, and collapsed in 2016 along with free-falling prices. As gas prices rose in 2017, so did pipeline construction jobs.
While pipeline construction jobs grew as natural gas prices increased, the growth has yet to translate into broader growth for the state's economy, a recurring problem with the state's extraction based industries. From 2016:Q3 to 2017Q:3, more pipeline construction jobs were added then total construction jobs, or total jobs as a whole, meaning the state's job market was experiencing little growth outside of this one industry.
And despite leading the nation in construction jobs growth in 2017, West Virginia's overall job growth was lackluster. West Virginia has added 7,300 jobs in the past 12 months, an amount that is not statistically significant. The state's 1.0 percent job growth rate the past 12 months lags the national average by 0.6 percentage points, and ranks 30th overall. This all suggests that despite the good news of new construction jobs, relying on a volatile extraction industry is not a recipe for broadly shared growth.