The price of oil has fallen by more than 50%. This is a two-edged sword. On one hand, there are going to be a lot of jobs at stake. The less oil rigs are in operation, the less oil rig operator jobs are available. It is simple math. Those people have to go somewhere.
The rising tide of unemployment in the energy sector of the United States can cause a dent in the overall economy. After all, during the darkest days of American recession and slow recovery, most of the jobs being created were in states like Texas and North Dakota. These are states with high fracking and oil extraction projects. Since oil crashed, these states are beginning to lose oil-related jobs. In fact, the number of oil rigs in the United States fell sharply, according to the latest figures released by the industry. These job losses might harm the overall U.S. jobs recovery.
On the plus side, a lot has been made of the surplus that American households are enjoying. Instead of paying a full dollar for fuel, they are going to be saving quite a bit of money off that dollar. The hope was that much of those savings would go into consumption. Economies, after all, grow when consumers spend.
This isn’t happening. While consumer spending is up, it might not be high enough to offset layoffs in both energy and non-energy sectors. Moreover, the increase in consumer consumption might not be enough to offset the decrease in business spending. This is bad news for the U.S. recovery.
The U.S. is fighting an uphill battle. The rest of the world is going through a period of economic slowdown while the U.S. seems to be speeding up. Well, it appears that the rest of the world’s economic problems are catching up to the United States, because the U.S.’s recent GDP growth rate showed signs of a significant slowdown. A lot of this might be traced back to the fact that consumers aren’t spending their savings on gas. Instead, they are saving.
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