US economy

Jobs and wages boom in America’s busiest oilfield


At the Burger King outlet in central Hobbs, New Mexico, a new sign has been plastered across the front window: “NOW HIRING: COOKS/CASHIERS APPLY WITHIN!”

Similar notices proliferate across the city’s main shopping plaza: Pizza Hut, Little Caesars, T-Mobile, CVS, K-Mart, Quickcuts, and Neighborhood Barbershop are all advertising vacancies.

A boom is under way in this dusty, sun-bleached desert town: joblessness is plunging, wages are soaring and new tax receipts are flowing to state coffers. Driving it all is a surge in crude oil production from the Permian Basin, a vast hydrocarbon trove that stretches across western Texas and south-eastern New Mexico.

While other US oilfields are in decline, Permian production hit a record high last year as Russia’s invasion of Ukraine helped drive energy prices higher. At 5.6mn barrels a day the field now accounts for almost half of all the oil produced in the US, pumping more than many Opec countries. The state of New Mexico’s crude production last year eclipsed output from the entire country of Mexico.

Unemployment in the US oil and gas industry slid from around 6 per cent a year ago to less than 2 per cent in December — the lowest in a decade, according to the Bureau of Labor Statistics. That stands in stark contrast to sectors of the economy buffeted by rising interest rates: tech companies have laid off almost 230,000 employees since the beginning of 2022, according to layoffs.fyi, which aggregates job cuts.

Line chart of Crude output (mn b/d) showing The state of New Mexico is producing more oil than Mexico

Some 1,500 miles from Silicon Valley, the bustle in the Permian is palpable. Oil and gas producers deployed 350 drilling rigs in the region last week, up by about a fifth from the same time last year, according to data collected by Baker Hughes. Other jobs have followed, from truck drivers and mechanics to hotel cleaners and construction workers.

“Business is booming,” said Bruce, a 19-year old employee at a Hobbs supermarket as he retrieved trolleys scattered about the plaza car park by the nightly influx of oilfield workers. “Work is at an all-time high . . . everybody’s looking for somebody”.

Employers are competing for workers in Hobbs, New Mexico © Adria Malcolm/Reuters

Outside Hobbs, oilfield traffic weaves down winding county roads with names such as Battle Axe and Oiler. Lorries laden with sand and gravel speed down highways, pick-up trucks haul trailers carrying shining new diggers; SUVs cart diesel engines and coils of piping.

Their passengers are suddenly earning big money. Roughnecks in New Mexico can command rates of more than $27 an hour, according to consultants Rystad Energy, up from $18-20 a year ago. A commercial trucking licence alone is enough to bag a driver a salary of over $100,000 without so much as a high school diploma.

“Most of the entry level jobs right now are anywhere from $15-20 an hour — and usually more towards the high end,” says Sam Cobb, mayor of Hobbs. “It is an excellent opportunity for people that are not from [privileged backgrounds]. Unless you’re an engineer, you don’t have to go to college to become an entry level worker in the oil and gas industry.”

Lea County, in which Hobbs sits, now produces more oil than any other county in the US from wells operated by companies including the listed Devon Energy and EOG Resources. Surging production has increased tax receipts for New Mexico, historically a state with one of the highest poverty rates in the nation. The state budget has jumped from less than $6bn four years ago to almost $9.5bn this year, with boosts envisaged for education, housing, healthcare and infrastructure spending.

“It’s been just spectacular,” says Cathrynn Brown, a Republican lawmaker in the New Mexico state House of Representatives. “It’s a boom for sure — but this is bigger . . . than anything we have seen before. It’s unprecedented.”

New Mexico’s crude oil production has eclipsed output from the country of Mexico © Ernest Scheyder/Reuters

Hobbs has known booms — and busts — before. In the 1980s, when oil prices crashed to historic lows, cars in town bore bumper stickers that read, “Can the last person to leave turn the lights out?” The start of the pandemic in 2020 effectively halted oilfield activity as prices again collapsed, clobbering workers.

Now the mood is different as experts forecast record global oil demand this year and crude prices stabilise around $80 a barrel.

Plum salaries in the oilfields have drawn workers from traditional service jobs like retail and hospitality, leaving restaurants running at half capacity owing to a lack of staff. Others have jacked up wages in a bid to compete: Burger King is offering up to $28 an hour to flip burgers, a job that pays an average of $19 in high-cost New York.

“Trying to recruit in oilfield jobs that’s hard enough. But recruitment in retail jobs is very difficult,” says Jennifer Grassham, who runs the Lea County economic development board. “I would say everyone is looking for people. It doesn’t matter whether it’s retail or oilfield.”

Hotel rates are climbing, with rooms increasingly booked out in the middle of the week to accommodate visiting workers. Insignia Hospitality, which operates a portfolio of more than 20 hotels across the Permian, is opening a new Hilton franchise in Hobbs next month, its fourth location in the city.

Rachel Overman, chief operating officer at Insignia, is optimistic. “Otherwise,” she said. “We wouldn’t be building a new hotel there.”

Lea County’s unemployment rate sat at 3.7 per cent in November, roughly in line with the national average. Locals say the reality on the ground in the county of 73,000 people is an even tighter labour market.

“There’s an unemployment number. But my personal opinion is I think those people are the ones that don’t want to work — because there are jobs,” says Dustin Armstrong, head of the local chamber of commerce. “We’re in the busiest spot in the busiest oilfield in the US.”

Line chart of Unemployment rate (%) showing The US oil jobs market is booming

The current upcycle comes despite fears that the shale revolution that made the US the world’s biggest oil and gas supplier is drawing to a close. Wall Street is demanding that profits be returned to shareholders rather than splurged on drilling binges. And in many parts of the country, the best acreage has already been drilled.

Oil producers now complain about rampant cost inflation, another reason the US shale sector is on the whole struggling to increase oil supply as fast and easily as in the past. On top of this, the push to wean the world’s biggest economy off oil and gas in favour of cleaner alternatives is gaining pace.

But in the Permian, there is confidence that America will continue to guzzle the hydrocarbons it produces for a long time to come.

“We look at the whole energy mix dilemma from a different lens since we are in the business here,” says John Yates, chief executive of Abo Empire, a local producer. “The Permian Basin is more than 100 years old but that doesn’t render us to the pile of dinosaur bones.”



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