The Kern Economic Journal is a quarterly publication (February, May, August, and November). Its purpose is to track and analyze economic trends that affect the well-being of Kern County. In doing so, the journal provides primary data on consumer confidence and business outlook as
well as secondary data on a wide range of economic indicators. These data help the community make more informed decisions. Sources of funding for the journal include university contributions and sponsorship fees.
The world’s largest economy of nearly $17 trillion, the United States, grew by a substantial 3.0 percent in the second quarter of 2017, nearly triple the growth of 1.2 percent in the first quarter of 2017. The increase in real GDP reflected increases in consumer spending on goods and services, as well as increases in business investments, exports, and federal government spending. Unfortunately, there were declines in housing investments, hinting that we may be at the peak of the newest housing market, as well as declines in state and local government spending.
As we enter the start of summer, even oil prices stabilizing have not been able to prevent a third consecutive quarter decline in personal income, likely due to the anticipation of a very hot summer that may limit agricultural production. Since the first quarter of 2017, personal incomes have fallen by over half a billion dollars. Even though property incomes have increased by $12 million since the first quarter of 2017 (largely due to the increase in median home prices), labor incomes fell by over $50 million, and profit incomes fell by over half a billion, indicating that businesses are perhaps starting to see some struggles with an uncertain tax and healthcare situation. On an annual basis, in the second quarter of 2017, personal incomes fell by 8.6-percent, compared to the first quarter of 2017.
Between 2014 and 2017, oil prices plunged from $93.17 to $48.63 a barrel (U.S. Energy Information Administration). There are many possible explanations for this drop, but one of the factors keeping prices down is the boom in shale oil which has dominated the U.S. market. So how do lower oil prices affect employment and wages in oil producing regions in the U.S? Some say that lower oil prices which reduce employment in the oil and gas sector reduce the cost of doing business in other sectors, causing a gain in employment in industries such as transportation, farming and service. Others argue that the oil industry supports upstream, midstream and downstream operations involved in oil production, meaning that a slowdown in oil production could see a reduction in exploration, production, storage, marketing, transportation, refining, and distribution which are aligned to oil (Marine Oil and Gas Academy 2017). A growing body of literature has sought to study the adverse effects of oil price changes on wages. In this article, I study trends, growth rates and the correlation between oil prices, employment and wages in the U.S’s top oil producing regions between 2011 and 2015. I focus on these regions because they have largest concentration of workers in oil and gas shown in Figure 1. The regions include: Kern County in California; Weld County in Colorado; Eddy County in New Mexico; Williams County in North Dakota and Karnes County in Texas.
By every appearance, retail and commercial trade in Bakersfield is thriving. Drive past areas in the Southwest and Northwest of the city on your daily commute, and you see new retail shopping centers opening, new office spaces being advertised, and a variety of economic development occurring. But do these observations match the data and what is actually occurring?