The latest employment numbers from the Bureau of Labor Statistics (BLS), as well as a forecast from IHS Global Insight, underscore the obvious: The states with large deposits of fossil fuels are carrying the economic recovery.
If the goal is to promote rapid job creation—and that’s what most policymakers tell us—then the obvious solution is to remove government obstacles to the rapid development of such domestic resources.
According to the BLS, in November North Dakota retained the nation’s lowest unemployment rate, at 3.4 percent. Even mainstream media outlets have reported on the North Dakotan oil boom and the surge of jobseekers rushing to the state.
What they haven’t reported, however, is one of the key reasons for the energy-based recovery: North Dakota is only 4 percent owned by the federal government. That means Washington can’t stop the economic engine in North Dakota . . . yet. More on that later.
The IHS analysis explains that the pattern is general, as the Bloomberg story reports:
"The U.S. economic expansion that began in June 2009 shows a dichotomy at the state level, with Nevada, California and Florida labor markets still languishing from the real estate collapse at the same time domestic energy production drives employment in North Dakota and Alaska.
"By the first quarter of 2012, oil and gas-rich Texas will gain back all of the jobs it lost during the last recession, the third state to do so after North Dakota and Alaska, according to a forecast released today by IHS Global Insight Inc. Nevada and Michigan won’t get there until 2017 or after. An energy-based economic recovery . . . for some states … The economies and labor markets in Alaska, North Dakota and Texas all reflect rising energy prices and increased spending on exploration…"
Economists differ on their theories for what “really” caused the current recession, but it’s pretty clear what a recession is: More people are trying to find work at prevailing wage rates, than employers want to hire. If unemployed workers were willing to take big pay cuts, it would make sense for somebody to hire them, but many job seekers prefer to keep looking for a better option. (The continued extension of government unemployment checks prolongs this adjustment process.)
From this perspective, one way to end a recession is to make workers more valuable to prospective employers, so that a business can make enough money off of the new hire in order to justify a wage or salary that is attractive to the worker.
Generally speaking, this is a difficult problem that can’t be magically solved through willpower. There are genuine constraints on the productivity of workers, based on their skills, available machinery and other equipment, and so on.
Yet when it comes to the booming fossil energy sector, there really are “free lunches” available. The federal government currently restricts energy development in ANWR and the Outer Continental Shelf (OCS), and it is holding up construction of the Keystone pipeline.
To see that Uncle Sam is holding up development on onshore areas as well, note that from 2000-2010, oil production on federal lands dropped 44%, while oil production on private and state-owned lands rose 11%. To understand these trends, it’s significant that only 2.4% of the OCS is currently under lease, while only 3% of total federal land (including the OCS) is under lease. A sharp change in federal policies would lead to an almost instant creation of many thousands of jobs, not to mention lower energy prices for consumers and thus a higher standard of living.
What’s more, these improvements wouldn’t be a fleeting pick-me-up for the economy. As IER’s new report on North American energy demonstrates, our continent is awash in resources. Here are some salient facts from the report:
- The government’s own figures show that the United States’ combined recoverable oil, natural gas, and coal endowment is the largest on Earth.
- The amount of oil that is technically recoverable in the United States is more than 1.4 trillion barrels. Total recoverable oil in North America exceeds 1.7 trillion barrels. (That is more than the world has used since the first oil well was drilled over 150 years ago in Titusville, Pennsylvania.) To put this in context, Saudi Arabia has about 260 billion barrels of oil in proved reserves. For comparative purposes, the technically recoverable oil in North America could fuel the present needs in the United States (seven billion barrels per year) for around 250 years.
- The government estimates that the United States has 272.5 trillion cubic feet of proved reserves of natural gas. The total amount of natural gas that is recoverable in North America is approximately 4.2 quadrillion (4,244 trillion) cubic feet, enough (at current rates of consumption) to last the United States for over 175 years.
- North American recoverable coal could provide enough electricity for the United States for about 500 years at current levels of consumption.
Perfection is unattainable in the real world. No matter what government policies are implemented, there will always be homicides and cancer deaths, at least for the foreseeable future. The U.S. government can’t cure global poverty either.
However, when it comes to the agonizingly slow recovery from the current recession, there are clear steps that would spur domestic job creation. Anyone who opens his eyes can see that fossil fuel sources are driving what little growth we currently have. The federal government need only get out of the way to unshackle entrepreneurs to boost that trend.
Robert Murphy is a senior fellow at the Institute for Energy Research.
