Rising Labour Costs Despite High Unemployment

[GRG55]

EJ predicted this would happen...that regardless of persistently high overall unemployment rates there would be significant sectors of the USA economy that would be subject to rising labour costs due to shortages of people with the right skills...

Patterson-UTI Comments on Third Quarter 2011 Results

HOUSTON, Oct. 12, 2011 /PRNewswire via COMTEX/ -- PATTERSON-UTI ENERGY, INC. (NASDAQ: PTEN) today announced that it currently expects third quarter of 2011 earnings per share to be similar to the second quarter of 2011. Revenues for the third quarter of 2011 increased by 12% to $674 million, compared to $600 million for the second quarter of 2011. This increase includes approximately $50 million from our drilling segment and $25 million from our pressure pumping segment, partially offset by a decrease in revenue from the sale of oil and natural gas. The improved drilling revenue results from both higher rig count and average revenue per operating day. Pressure pumping revenue increased more than 12% sequentially despite the interruption of operations caused by hurricane related flooding in Appalachia. Increases in operating expenses and non-cash costs (depreciation, depletion, amortization and impairment) are largely expected to offset the revenue improvements described above. Operating expenses for both drilling and pressure pumping increased as a result of higher activity levels and some cost inflation. Sequentially, average costs per operating day in the drilling segment also increased primarily as a result of higher repairs, maintenance and labor costs... ...Labor costs increased primarily as a result of higher wages and additional training costs for field personnel in certain of the markets in which we operate... ...Patterson-UTI Energy, Inc. subsidiaries provide onshore contract drilling and pressure pumping services to exploration and production companies in North America. Patterson-UTI Drilling Company LLC has approximately 350 marketable land-based drilling rigs that operate primarily in the oil and natural gas producing regions of Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah, Wyoming, Montana, North Dakota, Pennsylvania, West Virginia, Ohio and western Canada. Universal Pressure Pumping, Inc. and Universal Well Services, Inc. provide pressure pumping services primarily in Texas and the Appalachian region...

[thriftyandboringinohio]

Re: Rising Labour Costs Despite High Unemployment

I see it as a positive development, because I don't think an economy can work well unless many people are getting a good paycheck.
As wages rise for specialized high-skill work, we should expect companies to respond by hiring additional lower-wage people to be assistants and helpers to the highest paid employees. Could start a virtuous cycle of increasing jobs and spending towards recovery
.

[c1ue]

Re: Rising Labour Costs Despite High Unemployment

As wages rise for specialized high-skill work, we should expect companies to respond by hiring additional lower-wage people to be assistants and helpers to the highest paid employees. Could start a virtuous cycle of increasing jobs and spending towards recovery

That's assuming the wage increases propagate to the rest of the economy.

I don't see any evidence of this whatsoever.

Examination of 3rd world nations shows a similar pattern: those occupying jobs necessary to the welfare of the state or large corporations have great lives, everyone else lumps it.

[GRG55]

Re: Rising Labour Costs Despite High Unemployment

That's assuming the wage increases propagate to the rest of the economy.

I don't see any evidence of this whatsoever.

Examination of 3rd world nations shows a similar pattern: those occupying jobs necessary to the welfare of the state or large corporations have great lives, everyone else lumps it.

So what exactly do you think the engineers and rig hands at Patterson-UTI are doing with their incremental wages and salaries? Buying bullion and stashing it under the mattress?

I'm with "ohio". The economy won't recover until wages and salaries start to rise, at a minimum in nominal terms.

[Guest]

Re: Rising Labour Costs Despite High Unemployment

Rising wages for certain job skills are a signal to the market that more workers are needed. Companies will either train more skilled workers themselves or people will hear about the higher wages and obtain those skills. There is of course some delay involved. That's the way the world works and always has.

In contrast, you never heard about the huge salaries and high demand for English, political science, and sociology majors. But people wasted money getting college degrees in that anyway due to the easy money made available to them thanks to govn't backed loans.

Part of the problem with the FIRE economy and government meddling was that it was easier to make a buck in finance than doing something that required one to train and nurture employees so they'd become more productive doing real work. Companies relied on already-trained workers someone else paid to work up to speed instead of doing it in-house. Eventually you run out of skilled workers. It's analogous to a baseball team trying to win only by hiring free agents and neglecting their farm system. If everyone does that you run out of highly skilled free agents. Government and universities cannot provide real-world job skills, only employers can do that for most occupations. Universities can provide the base needed to learn from, but no enginer or biologist sits down at a desk his first day of work and starts being productive.

As for rising wages causing a recovery, to some degree that assumes that consumption is what you want driving the economy, which may not be wise. Excess capacity , be it in homes, factories, or labor, causes lower prices. There's a very easy way to reduce our excess labor capacity but nobody wants to mention it.

[c1ue]

Re: Rising Labour Costs Despite High Unemployment

So what exactly do you think the engineers and rig hands at Patterson-UTI are doing with their incremental wages and salaries? Buying bullion and stashing it under the mattress?

How many engineers and rig hands work for Patterson-UTI? And in the United States?

What's the multiple of other people who can be supported from a single job? This is about 3, maybe 5 given the examples of various Michigan cities and the car industry.

Now how many more Patterson-UTI's are necessary in order for the overall US economy to achieve overall rising wages and salaries?

I'm with "ohio". The economy won't recover until wages and salaries start to rise, at a minimum in nominal terms.

I actually agree with this.

I just don't agree that a few specialists in a narrow field is going to do the trick.

In the EDA industry, as I've written before, the overall employment is the same. However, the number of jobs in the US has fallen by 50% to 70%.

Those jobs aren't coming back barring major systemic changes, nor are the 3 to 5 'dependent' jobs.

[GRG55]

Re: Rising Labour Costs Despite High Unemployment

How many engineers and rig hands work for Patterson-UTI? And in the United States?...

The company has 7000 employees in total, and I would say from the description of its businesses below that the overwhelming majority are in the continental USA [with most of the remainder in Canada]. As for how many are engineers or rig hands, that would be difficult for an outsider to determine with any precision, but I am quite certain with more than 350 drilling rigs the numbers in those cohorts is not trivial as a percentage of the employee headcount. Here's a link to their rig locator, just in case you thought they were outsourcing their work to China http://patdrilling.com/rigs

Patterson-UTI Energy, Inc., through it subsidiaries, provides onshore contract drilling services to oil and natural gas operators. The company offers pressure pumping services that consist of well stimulation and cementing for completion of new wells and remedial work on existing wells in Texas and the Appalachian Basin; and contract drilling services primarily in Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah, Wyoming, Montana, North Dakota, Pennsylvania, West Virginia, and western Canada. It also owns and invests in oil and natural gas assets located primarily in Texas and New Mexico. As of December 31, 2010, the company had drilling fleet that consisted of 356 marketable land-based drilling rigs. Patterson-UTI Energy, Inc. was founded in 1978 and is headquartered in Houston, Texas.

What's the multiple of other people who can be supported from a single job? This is about 3, maybe 5 given the examples of various Michigan cities and the car industry...

What difference does it make. What is the multiple of other people who can be supported by laid off autoworkers? Or recently fired bankers? Vegas, Phoenix, Bakersfield or Orlando realtors? Former mortgage brokers at Countrywide?

The point I made when I created the thread stands. These people produce something of value that you need...and are willing to pay for. Energy. Something of tangible value unlike a house with an inflated price tag down the block, backed by levered paper spread from NY to the Arctic Circle and beyond, and a network of professional groupies all spreading the cult of "wealth creation" and working for their little cut of the action.

Every rig they run, and every well they drill requires a plethora of support personnel. From maintaining the machinery, replacing consumables such as pipe, drill bits, lubricants and fuels, providing support services and materials such as drilling mud systems, perforating, testing equipment, wireline, fluid analysis and other chemical lab services, completion and reservoir stimulation technologies, catering, housing, trucking of the rigs to the next location, lease preparation and earthworks, and a host of other activities.

Now how many more Patterson-UTI's are necessary in order for the overall US economy to achieve overall rising wages and salaries?



I actually agree with this.

I just don't agree that a few specialists in a narrow field is going to do the trick...

No, it's probably going to take a few specialists in a lot of narrow fields to do the trick. So what? The alternative is we all become lawyers and go into politics, or economists and get a job at the Federal Reserve.

[lektrode]

Re: Rising Labour Costs Despite High Unemployment

...No, it's probably going to take a few specialists in a lot of narrow fields to do the trick. So what? The alternative is we all become lawyers and go into politics, or economists and get a job at the Federal Reserve.

or borrow thousands to get masters degrees in sociology, psychology, 'ethnic/womens studies', art history, child and family studies, basket weaving, bubble blowing, snake charming etc etc
and WORK FOR THE .GOV!?

heres some more beauties: http://www.toptenz.net/to-10-useless...es-degrees.php

[c1ue]

Re: Rising Labour Costs Despite High Unemployment

What difference does it make. What is the multiple of other people who can be supported by laid off autoworkers? Or recently fired bankers? Vegas, Phoenix, Bakersfield or Orlando realtors? Former mortgage brokers at Countrywide?

The point is the 'multiplier' effect you speak of is easily discernable from examples like Flint, where the primary income source was the automotive industry.

Since data on employment levels at the auto manufacturers is easily discernable, as are overall employment levels in Flint, then this gives some idea on just how much 'trickle down' effect a 'core' job has.

As for oil and gas, according to the BLS there are some 162000 people working in this field.

http://www.bls.gov/oco/cg/cgs004.htm#emply

In contrast auto assembly appears to have employed 190,000 in 2008:

http://money.cnn.com/news/specials/s...teautoworkers/

No, it's probably going to take a few specialists in a lot of narrow fields to do the trick. So what? The alternative is we all become lawyers and go into politics, or economists and get a job at the Federal Reserve.

The oil and gas industry hardly seems like a narrow field from the data above.

More importantly, however, the tens and hundreds of thousands of offshored and outsourced jobs are not going to be replaced by even hundreds of narrow specialty fields.

Perhaps you might consider re-reading Andy Grove's assessment of the semiconductor/hi tech field's effect on employment in the United States.

[lektrode]

Re: Rising Labour Costs Despite High Unemployment

....Andy Grove's assessment of the semiconductor/hi tech field's effect on employment in the United States.

got a link for that?

[c1ue]

Re: Rising Labour Costs Despite High Unemployment

got a link for that?

Don posted it here: (#3 post)

http://www.itulip.com/forums/showthr...t-Up-Staircase