Release the Bakken!
New oil extraction techniques present an opportunity for staffing firms
By Robert Balicki
Recent developments in a drilling technique called hydraulic fracturing, or “fracking” for short, have made large amounts of oil and gas in western North Dakota and eastern Montana commercially accessible. The result is, by now, well known: an historic oil boom, accompanied by a massive shortage of workers and sky-high local wages.
This is a great opportunity for oil and gas staﬃng ﬁrms as well as ﬁrms in other segments.
Keen on Temp Labor
For many employers in North Dakota, the choice will be between hiring anyone they can get and going understaﬀed.
Data from our surveys conﬁrms this. In 2011, Staffing Industry Analysts asked buyers of temporary staﬃng whether they were planning on increasing their use of temporary labor. Buyers in the energy/chemical industry were most enthusiastic, with a net 47 percent saying they will increase their use of temp labor.
And indeed, employment in the category that includes temp workers has risen 18 percent in the past year in North Dakota, according to the Bureau of Labor Statistics (BLS).
The most salient results of the oil boom are a large increase in employment, a broad shortage of ready workers, rising wages and a severe housing crunch.
In North Dakota, employment in the category that includes oil and gas has risen 41 percent in the past year, according to the BLS. In fact, Jobs Service North Dakota (JSND) data reveals that seven of the top 10 fastest-growing occupations in the past year involve oil and gas.
The unemployment rate in the state is the lowest in the nation at 3.1 percent, compared with 8.3 percent nationwide. During the recession, it peaked at only 4.2 percent. There are 11,800 unemployed individuals in North Dakota, and nearly 21,000 online job openings, according to the BLS and JSND.
This has led to a large jump in wages, and not just for oil and gas workers. Wages in personal care (hairstyling and home healthcare, for example), restaurants and support industries for oil and gas (such as truck transportation and maintenance) have all risen substantially in the past year, according to JSND.
The largest impediment preventing the employment market from clearing is the severe shortage of housing. Workers often have to live in trailers for months before they can secure even a modest apartment. Employment in construction has risen 25 percent in the past year, according to JSND, but this has not been enough. The housing shortage is so acute that the energy giant Halliburton contacted a local Motel 6 and oﬀered to rent the entire hotel. The kicker: the hotel hadn’t even been built.
The end result is that this is a worker’s market, and therefore a staﬃng ﬁrm’s market. Any staﬃng ﬁrm that can convince workers to move to North Dakota and house them can make a hefty proﬁt.
Will it Bust?
While the Texas oil boom of the 1970s and the bust of the 1980s provide a useful cautionary note, there are reasons to believe that the experience in North Dakota will be diﬀerent, especially for staﬃng ﬁrms.
First, staffing ﬁrms do not face signiﬁcant sunk costs. When the boom peters out in North Dakota, agencies can and should pack up.
Second, extraction with fracking is much more labor intensive than from oil wells that use traditional methods. Because fracking releases shale oil that is stored underground in small pockets, wells have a shorter lifespan and a faster “decline rate” than do other wells.
And third, development of rigs is expected to continue at least 15-20 years given current technology, according to the North Dakota Oil and Gas Research Program. Improving technology may extend this further.
The technology will fuel extraction booms in Canada, the Midwest, the North East and even California.
Expect staﬃng opportunities at other formations, though other areas might not present the same challenges as North Dakota where there is not enough infrastructure to handle the inﬂux of workers.
Robert Balicki is a research analyst with Staffing Industry Analysts. He can be reached at firstname.lastname@example.org.