Last November, post-election polling clearly showed that the No. 1 U.S. voter concern was job creation. Despite economic variables pointing to an ongoing economic recovery in 2010, millions of unemployed Americans failed to land a job. The unemployment rate remained slightly below double digits as of early 2011, and forecasts for year-end unemployment topped 9%.

One sector of the American workforce—oil and gas extraction—fared much better compared to other occupations in the U.S. According to the Bureau of Labor Statistics (BLS) only 7,000 employees lost their jobs in exploration and production from the onset of the Great Recession to mid-2009, when the industry started hiring again.

Baker Hughes Inc. registered a drop in the total U.S. rig count from slightly more than 2,000 in mid-1998 to fewer than 1,000 one year later, but the industry shed only 4% of E&P-related jobs during this time.

Since mid-2009, more than 700 rigs have been put back to work, and employment levels have rebounded above 167,000—a multi-decade high.

In areas with significantly higher rig counts, unemployment is much lower than the national average.

E&P employment has proved resilient because energy is the lifeline for any industrialized economy. Domestic energy production is good not only for national security but also for the economy. Employment in the energy industry results in formal sector job creation that pays a higher wage, along with federal, state and employment tax revenue—something that the U.S. federal government and many state governments desperately need.

One reason job creation in the oil and gas industry has been so robust is the onset of horizontal drilling for unconventional natural gas and oil. Before 2005, only 10% of domestic rigs drilled horizontal wells, according to Baker Hughes data dating back to 1991. As of December 2010, however, horizontal drilling accounted for 56% of all wells drilled in the U.S. American technology and innovation have allowed more than 150 companies to extract oil and gas from fields that were previously considered inaccessible.

Horizontal drilling for first, unconventional gas, and now, unconventional oil, is a game-changer in the energy industry for several reasons. Timothy Considine, professor of economics at the University of Wyoming, speaking at Hart Energy's DUG-East event this past fall, noted that "past oil and gas development plays . . . have a burst of initial development," but then "the labor impact drops off." Shale development, however, is different.

First, unconventional oil and gas production is more akin to a manufacturing process than conventional production. Large numbers of wells for horizontal drilling are needed to tap unconventional resources versus the number needed for conventional development. Horizontal completions are more labor intensive than conventional completions, requiring a tremendous amount of business-to-business activity involving the local population throughout the producing well's life cycle.

Second, small businesses, in general, create more local jobs than do the supermajors. Hence, unemployment in shale oil and gas producing counties is much lower than the national average. Yet, as independents give way to supermajors in developing unconventional resources, the deep pockets of the big integrated oil and gas companies will ensure sustainable investment in shale oil and gas production.

Finally, the nature of unconventional development is also a boon for local landowners, who receive lease bonus and royalty payments from production on their lands. Shale plays spread the money around, benefiting individuals and companies in the local economy.

The link between job creation in the oil and gas extractive industry and horizontal well development in the U.S. is strongly correlated. Data from the BLS and Baker Hughes shows a correlation of 0.76 since January 2005.

Professor Considine has done some groundbreaking work in demonstrating the impact of shale development (or number of wells drilled) on county-level job creation and unemployment levels. According to the study, the development of the Barnett shale play created 132,497 jobs in 2008, and development of the Marcellus shale led to 57,357 more jobs in 2009.

The map of U.S. unemployment by county demonstrates that in areas where there is a significantly higher rig count, unemployment is much lower than the national average.

Crude oil imports in 2010 posted the second highest level ever and the trend is likely to continue in 2011.

Of course, the industry is changing again. While natural gas rigs dominated from 2005 to 2009, the oil rig count has surged of late. Since January 2009, gas drilling rigs have fallen by 38% as natural gas prices hover in the $4 per MMBtu range. Oil prices, however, have rebounded to the $90-per-barrel mark—making even marginal oil production extremely profitable. Consequently, the number of rigs drilling for oil has risen 27% since the beginning of 2009.

Given the rising bill for crude oil imports that American consumers are paying via higher current account deficits, it is difficult to fathom why some state governments have acted against shale oil and gas development. Crude oil imports in 2011 will most likely register their second-highest level ever, according to our analysis of U.S. Census Bureau data. Over the past five years, oil imports varied from 1.3% to 2.7% of U.S. gross domestic product.

Although obtaining self sufficiency in oil is not possible, cutting imports could reduce outflows of U.S. dollars and lower the current account deficit while adding jobs and tax revenue to state and federal ledgers. Policies designed to thwart shale development damage our national economy and curtail tax receipts for state governments that are facing stiff deficits.

Foreign national oil companies are scooping up American technology to develop their own shale-gas and oil plays in an effort to help fulfill national-security objectives and create jobs. International oil companies are investing because they appreciate the huge in-place resource and see the potential for continued improvement in well recoveries as they hone the extraction technologies. It is high time that American legislators understood how the market dynamics of shale oil and gas development create high-paying formal sector jobs to lower unemployment and help pull the U.S. out of its massive fiscal hole.

The U.S. total rig count fell from more than 2,000 in mid-1998 to fewer than 1,000 a year later, but the industry shed only 4% of E&P-related jobs during this time.