Today we saw the U.S. Jobs data report 252,000 new jobs for the month of December with revisions for the past two months showing another 50,000 jobs added. Unfortunately, that was the end of the good news.  While the overall unemployment rate featured six-year lows, the participation rate and average hourly earnings kept pace with that decline, a curiosity that was not lost on analysts and traders.  One would expect to see wages rise as more jobs are created and the rate declines, but that is not the current case.  Whether it is the fault of the low quality of jobs, entitlements, previously unseen monetary policy or some combination of these (or other) reasons, it does question the validity of the data.  Considering the quality and earning potential of the new jobs being created seems to be relevant to the sustainability of the recovering U.S. jobs picture. No industry would be more important to this concept than the energy complex.

Energy production and consumption are chief liabilities and/or assets when considering the economy, from households to major corporations. While lower energy prices put pressure on the industry to tighten its belt, other factors could prove beneficial.  For example, drillers may need to cap wells and reduce staff, while large consumers of energy like plastics manufacturers could benefit greatly from urging expansion and fresh hiring.  So the question then becomes. “which of these resulting factors of energy price reduction is greater?”  The truth of the matter is that it’s probably very close to a zero-sum, with the contraction being eventually negated by the positives.  And there is the rub: it would appear that the contraction due to lower prices would show up more immediately than the growth factor, though today’s data doesn’t seem to reflect that likelihood.  The next two or three months of employment data should give us a much clearer glimpse into this sort of give-and-take. 

Another key factor in the energy complex related jobs picture will almost certainly be the extent (or lack thereof) to which the producers have been and currently remain hedged against lower pricing.  If a mid-level drilling company were fortuitous enough to have used some of the many available tools to protect themselves and their business plan against the possibility of lower prices, they would not have to cap wells, lay off employees or both because of the steep profit drop.  Unfortunately, it seems that more producers than not were unprotected. Interestingly enough, on the consumer end of the energy equation, purchasers have received a windfall through lower prices. These consumers should be the ones considering heading that price action in an attempt to avoid being a casualty should energy prices spike in the near future.

All in all, it will undoubtedly be some time before we have absolute clarity on energy’s effect on U.S. jobs.  New projects like the KeystoneXL Pipeline or other infrastructure could further enhance that equation.  If it does prove to be a net/net result, the positive tipping factor could be organic: placing more spendable cash in consumers’ pockets.