There is no question that falling oil prices are good for a USA-style consumer-driven economy. Falling oil prices put more money into the hands of the consumer — and it is appearing the consumer is now spending more in this holiday season.
Already, falling oil prices are migrating into the supply chain reducing costs of providers of non-energy products and services — and reducing the prices for consumers. So not only is the consumer benefiting from lower fuel prices, but is benefiting from some other prices. If consumers buy more, a further positive cascade migrates into the employment situation where providers of goods and services will need to hire more workers to fill the demand.
And yes, there will be a headwind to employment — as prices fall below extraction costs, less oil will be mined in the USA. But in perspective, the oil mining industry direct employment is a small, small fraction (0.2%) of USA employment.
If oil prices stay low, then the real USA economy will be in for a sweet ride. Of course, if the prices start to rise, then the benefits disappear and the USA economy slows. However, it is likely relatively lower oil prices will stay for the near term but it is unreasonable to believe they will remain as low for an extended time as the global demand for oil continues to increase (and lower oil prices will increase demand). [hat tip to Yardeni for the graph below].
Economic pundits tend to look only at one dynamic, extrapolate — and predict. There are a lot of things going on under the hood of the USA economic engine. The greatest ignored dynamic is that the US dollar is a global currency — and that the USA trade borders are literally open doors. I cannot quantify this dynamic and I have heard no one who has even begun to understand.
It is known that global economies are softening, and global trade is growing softer. Global exports always equals global imports. Oil producing countries will export less, and will import less. It means that other exporting countries will export less. This is an unquantifiable dynamic.
