Hiring stabilises, but demand for highly skilled professionals remains

After a peak in Q2, the Global Job Index has stabilised and remains above 2013 levels at the end of the third quarter. However, the impact on the index of the recent drop in oil prices, and the subsequent weakening in activity, has not yet been realized. Given the pessimism that has grown in certain areas of the industry, we expect hiring activity, on average, to lessen in the coming months although some markets and skill areas will remain strong.

The drop in oil prices

The price of oil has continued to drop since June as the global oil supply exceeds demand. Weak economic growth in the EU and China, political uncertainty in Russia/Ukraine and the Middle East, a rebound in production in Libya and a continued surge in production from the United States have all contributed to excessive supply versus demand.

While oil prices remain above breakeven, economics for most projects are coming under increasing pressure as businesses look to limit capital expenditures and shore up cash flow. This has already led to a slowdown in seismic activity and weakened appetite for exploration opportunities in many markets as well as the beginning of asset rationalization. We expect a consolidation in the oilfield services sector as companies look to cut costs and reduce surplus assets.

With reduced activity comes the inevitable reductions in workforce. We have seen layoffs in some areas and a slowdown in hiring, mostly exploration-related, although the labour market in production and infrastructure areas is still strong.

Variable strength of local labour markets

Looking across regions, the strength of local labour markets is highly variable, based on the stage of the investment cycle:

  • Africa’s proven oil reserves have grown by nearly 120% in the past 30 years and it is estimated that at least another 100 billion barrels are offshore Africa, yet to be discovered, according to US Energy Information Administration (EIA).
  • In the UK, the Scottish referendum on independence caused uncertainty amongst the industry with key players not willing to commit to further investment until the result was announced. Uncertainty has caused the job market to remain flat through the third quarter.
  • While the Mexican energy reform dominates the news in South America, Argentina is also seeking to make itself more attractive to international investment. Cooling in the Brazilian market because of legislative changes made in 2010 have the government reconsidering its stance on IOC ownership and operating control as well as local content requirements.
  • In the US, unconventional drilling activity continues at pace, as does related field-based hiring. We have seen a decided cooling in hiring in many service companies. US sanctions are targeting western cooperation with Moscow’s oil sector, causing uncertainty in that regions employment market. Although the demand for skilled engineers remains high, obstacles in securing work permits and overcoming western sanctions has seen Russia turn to Asia to fill the opportunities. While the sanctions remain in play, employers in the region tell us they are forced to put a hold on hiring plans.

A turbulent outlook

The outlook for the global industry in the last quarter of the year is set to be turbulent. A predicted further fall in oil prices coupled with western sanctions on Russia, violence in the Middle East and the Ebola outbreak in Africa will cause global hiring levels to remain flat in through to the end of 2014, with spikes and drops in key areas.

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