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April 4, 2012

Urban Affairs' study measures economic impact of shale

Recent operations in Ohio show increase in development, not jobs

By Patrick Elder

Cleveland State University is home to some very important research, a fact the Wall Street Journal discovered recently. A study from the Maxine Goodman Levin College of Urban Affairs on the economics of Ohio’s burgeoning shale industry was picked up by the Wall Street Journal’s economics blog because of some interesting findings.

The study, although limited in scope due to the brief time shale operations has been underway in Ohio, showed that the expected windfall of jobs from the shale boom has not been delivered so far.

The study – conducted by graduate assistant Kelly Kinahan, graduate student Maria Augosto and dean of the college of urban affairs Ned Hill over the summer of 2012 – attempted to measure the economic impact of shale development in Ohio by using local sales receipts and total employment as gauges . They compared the increases in these measurements in four different types of counties in Ohio – strong shale counties, moderate shale counties, weak shale counties and non-shale counties.

“The shale industry is something that’s going to be impacting Ohio’s economy,” Kinahan said. “We were just trying to get an early understanding of potential economic indicators that we would be able to monitor on a regular basis. “

It appears that, even at this early stage, shale development is having a sizable economic impact on highly invested counties. Those with strong shale development experienced a 21.1 percent rise in sales receipts over the course of 2012. In contrast, sales receipts in moderate shale counties grew 7.6 percent, in weak shale counties by 10.9 percent and in non-shale counties by 6.9 percent.

“We’re starting to see some pretty strong activity where strong shale deposits are located,” Kinahan said. “It’s very early on in shale development in Ohio, but the fact that we’re starting to see these things register is very important.”

What hasn’t registered yet are employment gains from Ohio’s shale boom. Strong shale counties saw the same employment gains as those of moderate shale counties. The 1.4 percent increase was also very similar to the increases of 0.8 percent in weak shale counties and 1.3 percent in non-shale counties.

While some may find the lack of employment growth disconcerting, Kinahan warns that the study was relatively limited in scope, and that shale production may very well lead to job growth in the near future. “We were just looking at total employment, so we didn’t separate out employment by sector or industry to really look at industries that might be particularly affected by growth in shale oil and gas,” Kinahan said. “It’s hard to draw any causality out of this. It wasn’t a full impact study, just two indicators that we wanted to start monitoring.

“It’s very early in terms of the growth of this industry in the state. We think that with some of the other leadership and organizations throughout the state that are focused on getting our workforce trained and ready for these kinds of jobs, there is certainly potential for long-term employment gains that could be captured within the state.”
As the movement to increase shale production continues, Kinahan and the rest of the researchers involved in this study will continue to monitor its effects on Ohio’s economy with quarterly updates. As long as shale is being fracked, Cleveland State will have its impact tracked.