By Howard Schneider

BAYTOWN, Texas (Reuters) - Plunging energy prices robbed the Texas economy of an estimated 60,000 jobs last year, as oil and gas companies put the brakes on production and slashed investment, throwing engineers and geologists out of work.

But the forest of construction cranes sprouting around this petrochemical hub tell the flip side of the story, as some of the same forces that drove down those prices sparked tens of billions of dollars in investment in new processing plants to take advantage of cheap and plentiful supplies of oil and gas.

Exxon Mobil Corp and Chevron Phillips Chemical Co, a joint venture of Chevron Corp and Phillips 66, are building mammoth chemical crackers to process polyethylene from natural gas, and logistics firms have created millions of new square feet of warehouse space as they plan to ship the output to the global plastics industry.

Rising chemicals output has contributed to record traffic at the Houston Port Authority, and officials say the trend is expected to continue. Throughout the Baytown area, which is on the outskirts of Houston, an estimated $8 billion worth of projects is expected to be finished this year and another $22 billion completed in 2017.

This has all propped up employment in Texas at an otherwise difficult time. The positive impact on the overall U.S. economy from the chemicals industry that this illustrates is also one of the reasons the U.S. should avoid a downturn despite troubles elsewhere in the world. That in turn should create the conditions for the Federal Reserve to raise interest rates again this year.

"They are shedding jobs upstream. That's the nature of the business," said B.J. Simon, associate executive director of the Baytown-West Chambers County Economic Development Foundation. But "the opportunity to build these crackers just could not be passed up...access to cheap feedstocks changed the whole equation downstream."

Construction workers have jobs, new schools are being built to handle a growing local population, a new Kroger Marketplace store is being completed, and a partially vacant shopping mall is being overhauled.





JOBS: THE FED'S NORTH STAR

The global economy may be sputtering, with weak demand one of the reasons that oil prices have cratered. But the U.S. keeps adding jobs, and at a rate consistent with the outlook from Fed policymakers who expect growing U.S. payrolls will mean enough domestic spending to keep the economy expanding overall.

Texas "lost a lot of energy jobs," said Dallas Fed research head Mine Yucel, but the state "has been very resilient. I was surprised."

Across the oil patch, there's a similar pattern of positive trends offsetting bad news. Though low prices have crippled investment in exploration and cut drilling rigs, overall employment in Oklahoma continues to rise in a state that has built large logistics and defense contracting industries.

In North Dakota, ground zero for the fracking boom, overall employment has dropped, but the unemployment rate remains a super-low 2.7 percent compared to the national average of 4.9 percent. The number is held down by an expected adjustment: just as workers flocked to the state when vacancies were plentiful, the labor force has declined as the jobs disappeared and workers returned home.

These states represent a drop in the bucket compared to Texas's $1.6 trillion, 12.5 million-job economy, a size approaching that of Canada. Despite the oil downturn, the unemployment rate is only 4.7 percent as non-energy companies like fiber-optic manufacturer Applied Optoelectronics expand in the state.

In a rough year for the oil business, the state as a whole added 144,000 jobs in 2015, according to the Texas Workforce Commission, with strong gains across the trade and hospitality sectors, as well as professional services, health and education.





ROCKY START

The Fed meets next week to take stock of the U.S. economy after a rocky beginning to the year.

A rate hike is not expected at the March meeting but the central bank’s post-meeting statement and fresh economic projections from policymakers will provide important insight into how worried the Fed is about the combined impact of cheap oil and weak global demand on prospects for U.S. jobs, growth and investment.

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