Editor’s note: Opinions expressed by the author are their own.

U.S. oil and gas employment has started to fall as the sector contracts in response to lower prices over the last year—and further job losses are likely in the next few months as the rate of well drilling declines further.

In 2017/18, the second shale-oil boom created almost 100,000 new high-paying jobs in oil and gas drilling as well as associated services such as site preparation, cementing, casing and pressure-pumping.

Employment gains in the oil and gas sector also helped support tens of thousands more jobs along the supply chain including trucking, accommodation, retail and leisure services.

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The impact was felt intensively in some local areas—especially those overlaying the oil- and gas-rich Permian Basin in western Texas and eastern New Mexico.

Non-farm employment in the Midland metropolitan area at the heart of the Permian in Texas surged at an annual rate of 15% in the first nine months of 2018, data from the U.S. Bureau of Labor Statistics shows.

Non-farm jobs in the Odessa metro area, another Permian boom town, were up more than 10% in the first three quarters of 2018 compared with a year earlier.

But the persistent slump in oil prices since the start of October 2018 has brought job creation to a halt and replaced it with a gradual but steady trickle of layoffs.

Layoffs

Nationwide, the number of jobs at companies providing support services to the oil and gas industry, including site preparation and construction, has fallen progressively over the last year.

Employment in oil and gas support activities, subsector 213112 in the North American Industry Classification System, had fallen by 14,000 or 5% between its cyclical peak in October 2018 and August 2019.

Job losses have coincided with the downturn in activity shown in weekly drilling reports from oilfield services company Baker Hughes Inc., but more job losses could still be on the way.

Since November 2018, the number of rigs drilling for oil has fallen by 176 (20%) and for gas by 51 (26%), according to Baker Hughes. Job losses have been much smaller, so far.

Oilfield services companies have kept busy completing the large inventory of oil and gas wells inherited from 2018 and putting them into production.

Delayed completions of wells originally drilled in the second half of 2018 and early 2019 have largely sustained oilfield employment and ensured oil and gas output continues rising.

But the downturn in well drilling has started to filter through to fewer completions in recent months, which will put more pressure on jobs and production.

Completion rates for oil and gas wells fell every month between April and August, according to the U.S. Energy Information Administration (EIA).

Even so, completions are still outpacing the number of new wells drilled, with the result that the inventory of drilled but uncompleted wells is shrinking.

The number of drilled but uncompleted holes shrank by 536 (11%) between January and August, according to the EIA.

Even if drilling rates fall no further, completion rates seem likely to decelerate more, which will cut employment and slow production growth.

Employment losses in oil and gas will hit local job markets hard, especially where local firms had expanded expecting a continued boom.

The entire oil and gas supply chain and job market will remain under pressure until the global economic outlook improves and oil consumption growth returns closer to its long-term trend rate.