Mining Employment Trends of 2007-09: A Question of Prices: Employment Trends in Mining during the 2007-09 Recession Can Be Better Understood through Analysis of Commodity Indices and Other Major Economic Indicators
Davidson, Brian, Monthly Labor Review
Employment within the mining industry (1) followed a different pattern than that of most other industries during the 2007-09 recession. (2) (See table 1.) Indicators such as commodity prices, global demand for mining output, and industrial production help tell the story of how job growth within mining continued through the first 10 months of the recession while total nonfarm employment was falling.
Increasing energy and commodity prices and industrial production fueled job growth in mining, leading to an employment peak of 728,000 in the sector in September 2008, the highest level since June 1986. Employment then fell over the next 13 months before reaching a trough in October 2009, 4 months after the recession had ended. In the decade or so leading up to the recession, employment among the subsectors within mining followed similar long-term growth trends, while support activities for mining was the primary source of employment gains in the sector.
At the most recent peak of mining employment, in September 2008, 69 percent of the employment was in oil and gas extraction and in support activities for mining. Both of these subsectors are associated primarily with oil. Support activities involve the maintenance and drilling of wells, whereas oil and gas extraction, as its name implies, focuses on the extraction of petroleum resources.
Similarly to oil and gas extraction and to support activities, coal mining saw substantial job growth before the peak in the business cycle in December 2007. Coal mining represented 11 percent of mining sector employment in September 2008. Employment in metal ore mining rose during the first few months of the recession and then dropped, whereas employment in nonmetallic mineral mining began falling before the recession along with construction activity and continued to do so throughout the recession.
Effects of global energy demand
Global energy production and global energy demand increased together before the recession and during the first few months of it. During 2007, China and India, two of the world's largest economies, saw their petroleum consumption increase by 3.7 percent and 4.1 percent, respectively, while worldwide consumption increased by only 0.7 percent. (3) Given the difficulty of increasing crude oil supplies on a timely basis and the low absolute value of the price elasticity of demand for oil, the price of oil rose sharply. The spot price for West Texas Intermediate crude oil reached a high of $133.93 per barrel in June of 2008. As prices rose, businesses and consumers were spending a disproportionate share of their earnings on oil products. Because of the worldwide decline in industrial production, demand for crude oil dropped near the end of summer 2008. (4) From 2007 to 2009, global consumption of petroleum declined by over 1.6 million barrels of petroleum per day. (5)
Before the peak in oil prices, as demand for energy increased, more exploratory and development wells were drilled. (6) In 2008, 355 million feet were drilled, nearly twice as many feet as were drilled during 2001 and 46 million more feet than in 2007. (7) Drilling activity led to increased demand for support activities. An employment peak in support activities for mining occurred 10 months into the recession. Employment in support activities for mining accounted for 67 percent of job gains in mining from the start of the recession to the September 2008 peak in total mining employment and in production in the industry of drilling of oil and gas wells. (8) Oil and gas extraction contributed 23 percent of job gains in mining during this period. Employment in oil and gas extraction reached a high 3 months later than employment in support activities. As nonenergy industrial production lessened, demand for energy resources, and thus employment in mining, fell with it.
From September 2008 through June 2009, mining employment fell by 92,000. Support activities for mining accounted for 74 percent of total employment losses in mining. …