For all the hype about job growth and energy independence surrounding increased oil and gas activity in the shale plays, the overall effect to date to the U.S. economy is modest at best, say analysts with Barclays Capital Inc. But the best is yet to come.

“Dramatic changes in U.S. energy markets as a result of the revolution in oil and natural gas drilling technologies have led to a direct—albeit modest—boost to U.S. gross domestic product (GDP) and industrial production,” said Dean Maki, economics research analyst for Barclays, in a research report on U.S. shale energy and equity market effects.

Job growth and GDP will continue to rise due to increased oil and gas activity, he said, “with the effects likely to grow over time.”

The oil and gas boom has had a positive impact on several macroeconomic indicators, including trade, industrial production, employment and inflation.

The U.S. trade deficit for petroleum products declined 1%, from 1.9% of GDP in fourth-quarter 2005 to 0.9% first-quarter 2013, “the largest factor in narrowing the overall real trade deficit,” according to the report. Likewise, increased oil and gas drilling has gained ground as a percent of industrial production from “low single digits” in fourth-quarter 2009 to 10.3%.

Employment generated by oil and gas extraction, support activities and pipeline construction has grown by more than 260,000 jobs since the end of 2005, compared with overall U.S. employment growth of 618,000 in the same period. “Still, these direct effects are modest relative to the current pace of labor market improvement,” which is currently adding some 173,000 overall jobs per month, compared with 3,000 in the oil and gas sector.

Indirect effects of increased drilling are anticipated from expected lower energy prices, including more discretionary funds to spend for households and businesses, and cost advantages that motivate firms to locate in the U.S. “The U.S. manufacturing sector is the primary beneficiary of these cost savings.”

So far, the analysts say, “the positive effects on GDP and employment growth of shale drilling appear to be modest.” However, “there is good reason to expect them to grow larger in the coming years.” They cite jobs from near-term construction of LNG facilities, investment spending by manufacturers expanding in the U.S. and incremental effects of lower electricity prices resulting from lower natural gas costs.

When it comes to equity markets, Barclays repeats that shale activity will have a modest effect there as well. While lower energy costs create competitive advantages for refiners and chemical companies, “We prefer capex beneficiaries— major service companies and pipeline infrastructure—to more commodity-leveraged positions,” advised analyst Barry Knapp.

However, he noted, refiners offer “a very attractive risk/reward” as Barclays anticipates refining spreads to remain wider than general expectations.

Going forward, watch for signposts that might affect equities leveraged to U.S. natural gas markets, they say, including shifts in U.S. LNG export policy, regulation that could limit hydraulic fracturing, accelerated coal utility plant retirements or outages and higher-thanexpected demand from gas utilities.

Any of these could disrupt the balance, “perhaps pushing gas prices higher and at the margin change the outlook for coal and gas demand.”

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