Dallas Fed Points to Trouble in Oilpatch

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Texas, the de facto energy capital of the United States, saw jobless claims increase in June, led in large part by filings from those working in the oil and gas sector, the Federal Reserve Bank of Dallas said.

"June declines were largely broad based across sectors, led by cuts in the oil and gas and professional business services sectors," Jesus Cañas, Dallas Fed senior business economist, said in a statement Friday. "The only sectors that added jobs last month were information services, education and health, and government."

San Antonio was the only city to see a notable decline in jobless claims for June, he added.

The downturn in jobs marked the first decline of the year, and comes as the impact from U.S. tariff policies are just starting to show up in the data. The Consumer Price Index, a gauge of consumer-level inflation, increased 0.3% month-on-month to June, after increasing just 0.1% the prior month.

The energy index was among those with the greatest increase, posting a 0.9% gain month-on-month to June, federal data from last week showed. Energy commodities were down 7.9% annually, however. West Texas Intermediate, the U.S. benchmark for the price of oil, averaged $68.17 per barrel last month, compared to $79.77 per barrel during June 2024.

Overall, employment growth in June was pegged at an annualized 1.3%, compared to 2.1% in May, dragging the Dallas Fed's employment index lower.

"Decreases in well permits, average weekly hours, real oil prices, and an increase in new unemployment claims, also dragged the index down," the report read. "A drop in the Texas value of the dollar was the only positive contributor to the index."

In the so-called Beige Book, a summary of economic conditions across the various U.S. Fed districts, the Dallas Fed said last week that the overall outlook in the region was pessimistic. Higher prices are in store for the sector, particularly as steel tariffs create headwinds for the midstream sector due to the lack of U.S. manufacturers of pipeline steel.

"Contacts expect to cut capital spending in the second half of the year by more than initially planned, as oil prices will likely stay low on account of rising overseas production," the Dallas Fed's Beige Book read.

Turkey is hoping for an increase in exports as Baghdad and the semiautonomous Kurdish government discuss the fate of a long-suspended pipeline, while the Organization of the Petroleum Exporting Countries unwinds voluntary production curtailments.

Successive quarterly surveys from energy sector representatives, meanwhile, saw frustration with U.S. President Donald Trump's trade policies, where on-again, off-again tariff pressures are creating headaches for would-be investors.

"Despite efforts to mitigate their impact, the scale and breadth of the tariffs have forced us to pass these costs on to our customers," a respondent from the upstream services sector said in the second-quarter survey, published July 2. "This comes at a time when the economics of oil and gas production are already challenged due to the dynamics of global oil supply and demand."

Earnings season is under way for the second quarter. Midstream focused Kinder Morgan Incorporated (Houston, Texas) saw net income jump 20% year-on-year, supported largely by the natural gas sector in North America. SLB (Houston), formerly Schlumberger, said, however, that its customers were planning cautiously given the uncertain future.

In general, the Dallas Fed said it saw federal financial streams drying up as the government works to cut costs. A non-profit in the Houston area recently saw donations from the oil and gas sector decline, while some firms were hesitant to seek temporary job support for fear of Immigration and Customs Enforcements raids.

The federal energy department, meanwhile, expects U.S. crude oil prices to drop in the $50 range next year, creating further headwinds for the Texas economy.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).