Big; not that big

May 07. 2013 9:00AM - Last modified: May 07. 2013 9:31AM

Tim Stuhldreher

This wasn't its intent, but I think the Small Business & Entrepreneurship Council's report titled “The Benefits of Natural Gas Production and Exports for U.S. Small Business” indirectly validates some of the criticisms made of Gov. Tom Corbett's jobs record.

Tim Stuhldreher

Not the heat the governor took for suggesting that Pennsylvania's bad jobs numbers can be explained in part by applicants failing drug tests. Rather, the notion that the administration has focused too much on natural-gas development as the engine for Pennsylvania's growth.

The gist of the council's report is that the shale gas revolution has benefited U.S. economic growth and jobs and that allowing liquid natural-gas exports would be a good idea.

The latter issue appears to be the motivation behind the study. The chemical industry, a major user of natural-gas byproducts, is lobbying against increased LNG exports, arguing they would increase domestic prices. Study author and economist Raymond Keating called the argument "protectionist" in a conference call on his report last Thursday.

Keating's study documents all the ways the shale gas industry has bucked economic trends to deliver jobs and economic growth despite the Great Recession and the weak recovery.

Much of the benefit has accrued to small business, he said: Enterprises with fewer than 20 workers make up more than 90 percent of oil and gas extraction firms, 63 percent of oil and gas "pipeline and related structures construction firms" and about 60 percent of oil and gas field machinery and equipment manufacturing firms, according to his report.

There's no doubt such firms have done well in Pennsylvania: Employment in drilling here more than doubled between 2005 and 2010, the report said; employment in pipeline construction increased by 150 percent.

But those increases are from small bases. There wasn't much drilling in Pennsylvania before the shale boom. And here's the sentence that jumped out at me:

"While Pennsylvania employers overall shed 106,437 jobs over this period, employers in the four energy industries (where data was available) included here added more than 5,823 jobs."

(The "four energy industries," by the way, are oil and gas extraction, drilling oil and gas wells, support for oil and gas operations, and oil and gas pipeline and related structures construction. The report uses data from the U.S. Census Bureau's "County Business Patterns.")

In other words, a little more than one job gained for every 20 lost.

The Corbett industry has touted shale gas as the catalyst for a manufacturing renaissance in Pennsylvania. And it may prove to be so. Moreover, the administration points beyond direct employment to multiplier effects and indirect and induced jobs, all of which are relevant.

But a multiplier of 20? That's what it would take for shale to fill Pennsylvania's jobs gap, according to those numbers.

Actually, it would take a multiplier effect of 20 over and above whatever multiplier effect those 5,283 jobs have already had. If shale gas really had that big an effect, would Pennsylvania now rank 49th in job growth? If shale gas had produced 300,000 jobs, would we be down 106,437?

And what if a huge part of the promised impact fails to materialize, as this Pittsburgh Business Times report suggests?

Shale gas is a big deal. It has brought jobs and economic growth to northern and southwest Pennsylvania, not to mention midstate businesses. But in Pennsylvania's diverse, nearly $600 billion economy, even shale gas can only do so much.

Tim Stuhldreher covers banking, finance, energy and environment. Have a tip or question for him? Email him at tims@centralpennbusiness.com. You can also follow him on Twitter, @timstuhldreher.


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