Fracking boom won't create many manufacturing jobs
By Scott Sumner
The Wall Street Journal has an article entitled; “Gas Boom Rejuvenates Manufacturing.” There certainly are some manufacturing sectors that will be helped by the energy boom. However people shouldn’t expect too much from this development.
In a recent post I pointed out that population growth in Texas had slowed since the onset of the fracking boom. One problem is that as more engineers and skilled workers are drawn into fracking, fewer are available for other industrial jobs. Thus fewer manufacturing firms will move to Texas. The WSJ article expresses a similar concern:
In an about-face, the U.S. is drawing foreign manufacturing investments, Mr. Witte said. Inexpensive gas is luring Canada’s Methanex Corp. MX.T -2.69% to pack up its one-million-ton-a-year methanol plant in Chile and move it to Louisiana at a cost of $550 million. But all that building could cause construction costs to balloon as companies compete for a limited supply of labor and materials, particularly in Gulf Coast states, according to IHS.
The lesson here is that the rules of classical economics (opportunity cost) still apply in a depressed economy, just not as tightly. It is possible (though not certain) that fracking will lead to more manufacturing jobs. But any gross estimates of the gain in energy-intensive manufacturing sector jobs will wildly overstate the net impact on all manufacturing. The overall impact is likely to be so small that it doesn’t show up in the aggregate data. As our comparative advantage shifts, we’ll have more jobs in some industrial sectors and less in others.
Machines are much more easily adapted to producing things (agriculture, mining, manufacturing) than to producing services. Thus the relentless move toward a lower and lower share of all jobs being in agriculture and industry will continue. Not just in the US, but in Germany, China, and elsewhere.
Long term I don’t see machines replacing service jobs (in net terms.) Rather I see machines adding more and more consumption to the workplace. As when people surf the internet at work.