Despite a brief rally above $50 in the past week, oil prices were crushed yesterday falling to around $48.50 after US crude stockpiles were larger than estimated. Today, crude oil is rallying $1.22 to $49.70 after it found a relief rally from yesterday’s carnage. Despite very low oil, US shale producers are still producing oil on a large scale. Corporate wise, other than earnings hits, we have seen limited bankruptcies and defaults due to the crashing oil. However, what is not immediately able to be seen is the fact that oil companies are surviving due to big job cuts. Challenger, Gray & Christmas, Inc. released their “2015 January Job Cut Report” this morning which shows 53,041 Americans lost their jobs during January.
The report further details that oil’s massive fall is responsible for 40% of the 53,041 job cuts from January. Even worse, the total from last month was up 63% from December’s “planned layoffs” of 32,640 looking from a broad perspective. Additionally, the January layoff numbers rose 18% year over year.
Looking at the energy sector’s layoffs directly, 21,322 Americans lost their jobs to collapsing oil last month. The total number of jobs cut from energy sector for the entire year of 2014 comes out to be 14,262. Basically, what it comes down to is the fact that the total energy job cuts for January 2015 was 42% higher than the total number of jobs lost the entire year of 2014. This is a sever jump and certainly shows that oil-related companies are feeling the squeeze with very limited options to stop the bleeding, and unfortunately, job cuts are usually one of the first options that are used.
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The industrial goods industry is one that only has ties to oil from the fact that it sells materials and oil extraction-assisting products and the industry is seeing massive job cuts as well. There were 4,859 Americans that lost their job in the industrial goods industry during January. According to Challenger, 33% of those cuts, or 1,600 jobs were cut do to the loss of revenue from oil collapse.
The brightside to falling oil
While there are benefactors of falling oil, such as consumers, who have seen cheaper gasoline, airline tickets and other products that are usually hit by high oil. Car sales by the American Big Three, General Motors, Ford, and Fiat Chrysler, all rose in the mid-teens for the month of January. It will certainly be interesting to see whether these American auto makers turn to more mass hirings to increase their supply to meet with consumer demand. Ultimately, falling oil is both a curse and a much needed relief for consumers and workers. Some industries benefit and surge during when oil is low and others tend to crumble and wilt. For oil companies right now, it is all about survival and it is highly likely that we will continue to see mass job cuts from companies and industries that are tied to oil in some way.