1. Business

Lower oil prices could fuel more hiring in U.S.

Job seekers fill out applications at a job fair in Miami Lakes in October. With the price of oil below $50 a barrel, consumers will have more money to spend, potentially creating openings at retailers, auto dealers, restaurants and more.
Job seekers fill out applications at a job fair in Miami Lakes in October. With the price of oil below $50 a barrel, consumers will have more money to spend, potentially creating openings at retailers, auto dealers, restaurants and more.
Published Jan. 9, 2015

WASHINGTON — In June, when oil cost $107 a barrel, U.S. employers added a healthy number of jobs — 267,000. Now, with oil below $50, hopes are rising that hiring in the United States is poised to intensify.

Goldman Sachs forecasts that if oil stays near its current price, the economy will add 300,000 more jobs this year than if the price had remained at its June level. Stronger job growth is foreseen at retailers, auto dealers, shipping firms, restaurants and hotels — all of which will likely show gains in today's December jobs report.

From gas station prices to utility bills, consumers and businesses are now enjoying savings on basic energy costs. It means more people can splurge on purchases from clothing and appliances to vacations and dinners out. That stronger demand will likely require some businesses to step up hiring, which would circulate more money through the economy and perhaps fuel further job growth.

Just as critically, cheaper gasoline is suppressing overall U.S. inflation. Lower prices keep down yields on U.S. Treasury bonds. Lower yields, in turn, serve the housing market by reducing mortgage rates and potentially producing more construction jobs. This week, for example, the average rate on a 30-year fixed mortgage sank to 3.73 percent, its lowest point since May 2013.

"These lower oil costs are a tax cut for everybody — except the energy producers," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "It gives us an acceleration in employment."

AUTOS: Sales of new cars are forecast to exceed 17 million this year, a level not reached since 2005, according to auto analysts. The Energy Department says lower gasoline prices will save U.S. households $550 this year — roughly equivalent to four months of lease payments on a 2014 Honda Civic.

The additional sales will help boost the number of manufacturing jobs, which total 12.2 million but remain 1.5 million shy of its prerecession peak at the end of 2007, according to the government. It would also add to the ranks of the 1.2 million people who work at auto dealerships.

SHIPPING: Many trucking firms are plowing the savings from lower fuel costs back into their businesses. That helps the 4.7 million workers in the transportation and warehousing industries. "They're actually increasing driver wages," said Bob Costello, chief economist at the American Trucking Associations. Average pay in the transportation sector has risen 2.5 percent in the past 12 months to $20.61 an hour. But some trucking companies, such as Crete Carrier in Lincoln, Neb., are now advertising annual pay increases of 13 percent to recruit drivers.

RESTAURANTS: Falling gas prices have been a boon for restaurants. Restaurant sales rose 4.4 percent from June, when gas prices peaked, to November, according to government data. This suggests that hiring is poised to pick up because jobs at restaurants have risen just 1.3 percent over the same period.

HOUSING: At 3.73 percent, this week's average 30-year mortgage rate is down drastically from its 4.51 percent level a year ago. That gap translates into nearly $75 less a month in payments on a roughly average $165,000 mortgage — a savings of almost $900 a year.

The National Association of Realtors forecast this week that sales of existing homes would total 5.3 million this year, a 7.3 percent increase from 2014.

Follow trends affecting the local economy

Follow trends affecting the local economy

Subscribe to our free Business by the Bay newsletter

We’ll break down the latest business and consumer news and insights you need to know every Wednesday.

You’re all signed up!

Want more of our free, weekly newsletters in your inbox? Let’s get started.

Explore all your options

ENERGY: This industry is the primary loser as a result of falling fuel costs. Oil and gas drilling has been a source of job growth for five years, though it still constitutes a small percentage of the total. Bob Baur, chief global economist for Principal Global Investors, calculates that drilling has accounted for an average of 3,600 added jobs a month since 2010, out of a total average of 191,000 added each month.

Payroll processor ADP said this week that the mining industry, which includes oil and gas drilling, shed about 2,000 jobs last month after gaining an average of 3,000 a month in 2014.


This site no longer supports your current browser. Please use a modern and up-to-date browser version for the best experience.

Chrome Firefox Safari Edge