Last year, around this time, I wrote an article outlining what I thought would be some of the key factors that would affect the 2016 engineering job market in the chemical, petrochemical, refining and pharmaceutical/biotech sectors. Some of those factors included the continuing stagnation of oil prices and increased mergers & acquisitions (M&A) activity across several market sectors. Right around this time last year, we were witnessing some pretty seismic mergers, including the announcement of the Dow Chemical and DuPont merger. As we get ready to enter 2017, the story doesn’t seem to have changed much from last year, but there are some subtle differences that could point to changes as we move through the year.
On the M&A front, activity seems to have slowed, but there are still some pretty big things happening. Linde Gas and Praxair had been in talks to merge, then broke it off, and then started it up again. Bayer announced in Mid-September that it would buy Monsanto. You hear about potential deals and smaller deals here and there. While M&A activity is very cyclical, some suggest that it could point to tougher economic times ahead as the last two periods of furious M&A activity in the U.S. were proceeded by sharp economic downturns (late 90s and in the mid-2000s).
On the oil side of things, we’ve very recently seen some potentially positive developments, with OPEC and Russia both announcing plans to cut production. The true effect of those production cuts will likely be delayed into the middle of next year as crude oil and gasoline inventories are still running high in many countries around the World, including the U.S. In my analysis of the job market last year, I said that the industrial chemical and petrochemical industry job market would continue to be tepid until oil prices recovered and I still believe this to be the case. As of today, WTI Crude is sitting at $52.25 and Brent Crude is at $55.01. That is better than the early part of 2016 when prices were around $44-$45/barrel (and fell to near $30/barrel in Feb.), but not substantially better. One sign that things may be back on the upswing is the active oil rig count, which for the week of December 5th-9th, rose from 477 to 498. The active rig count has been steadily rising over the past 6 months which may be an early sign of a price recovery.
Switching gears a bit to the recent election of Donald Trump; it has been suggested that Mr. Trump would be amenable to rolling back some of the regulations that have been imposed on the chemical industry (and other industries) in recent years which would be beneficial to the bottom lines of many chemical producers. President-Elect Trump has also repeatedly called for a reduction in the corporate tax rate from 35% to 15% which, if passed, would also be a boon for business. These things remain to be seen, but it’s something to keep an eye on.
I am predicting the same thing for 2017 that I predicted for 2016…a lukewarm job market. The two biggest factors affecting the number of openings, in my opinion, are the continued M&A activity and the on-going low price of oil. If it were simply big companies acquiring small companies, it would be a different story, but you have giants (Dow, DuPont, Bayer, Monsanto, GE, Baker Hughes, Solvay, Air Liquide, etc) that are involved in these deals and when they are going through this process, they are not typically hiring, at least not at a normal pace. In fact, layoffs are usually a side effect of merger and acquisitions, in order to reduce the number of redundant roles in the new organization. On top of that, we are still seeing a glut of engineering talent from the oil industry downturn (100,000+ layoffs in 2015) that is slowly being absorbed by other industries. This all adds up to fewer jobs industry-wide. I don’t really see these two factors changing much in 2017, which is the basis for my prediction. For what it’s worth, the American Chemical Council (ACC), disagrees with me. After a tepid 2016, they are predicting that chemical output, both domestically and Internationally, will accelerate. They are also predicting modest gains in the job market. I hope they are right and I am wrong.
The Bright Spots:
There are a few bright spots in the market and I want to highlight those. On the chemical engineering side, the most marketable background is someone in batch or continuous chemicals (that use reaction and/or distillation) with 5+ years of in-plant experience and the title of production engineer, process engineer or production manager and a base salary in the $85,000 to $125,000 range. The more flexible you are on location, the more plentiful the opportunities are. On the mechanical engineering side, maintenance and reliability engineering roles are plentiful and we see a lot of manufacturing clients begging for these types of folks. On the electrical engineering side, controls engineering roles are also very plentiful, with DCS experience being the most sought after background.
In general, the Midwest and Southeast are the two areas of the country with the most jobs but there are openings with various companies all across the United States. Specialty chemicals and pharmaceuticals are the two hottest industries we are seeing and plastics/resins/polymers is also pretty steady.