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Texas unemployment climbed to a 21- year high in July, even as the nationwide jobless rate declined, after a plunge in natural-gas prices undermined a state economy that was spared the brunt of the recession before this year.

The July unemployment rate rose to 7.9 percent in the second-biggest U.S. state by population, the U.S. Labor Department reported today. The national jobless rate fell to 9.4 percent from 9.5 percent, the department said Aug. 7. Texas, which had a 4.9 percent jobless rate in July 2008, this year has seen its four biggest increases in unemployment since 1986.

One of the culprits, in a state so known for its oil riches that the stuff is often called Texas tea, is a collapse in prices for natural gas, the commodity that’s become a bigger part of the regional economy than crude. Texas has lost about 35,000 petroleum-industry jobs since December, rippling through other parts of the economy all over the state.

“I have a little more free time than I used to,” said Milton Moffett III, owner of the M. Moffett & Co. East Texas Land real estate brokerage in Woodville, Texas. “I have more time to mow my grass and work in my garden.”

Moffett, 46, said real estate sales in the area, part of the Haynesville Shale gas formation, are down about 50 percent from levels seen before gas tumbled. Retailers have been hurt, too, he said.

“It seems like it’s a little easier to get around the stores a bit,” Moffett said. “It’s finally hitting home. We thought we were immune from that.”

Companies Cut Back

Companies including Schlumberger Ltd., Apache Corp. and Halliburton Co. pared payrolls to cope with the gas slump. Prices for the heating and power-plant fuel have dropped 78 percent from their 2008 high and touched a seven-year low earlier this week.

“We’re going to witness fairly dramatic declines in Texas production of oil and gas,” said Karr Ingham, an economist at the Texas Alliance of Energy Producers in Houston. “We went through most of 2008 thinking we dodged a bullet free credit report online.”

For each dollar the Texas economy generated across all industries last year, the oil and gas sector contributed more than 11 cents, according to state data. Ingham said that ratio will decline this year. “We might be lucky to be at 7 percent,” he said.

Another reason why the state unemployment rate rose is because more people entered the pool of available workers, said Ann Hatchitt, a spokeswoman for the Texas Workforce Commission.

Despite the continued drop in oil and gas jobs, the state added a net of 37,900 jobs in July, the commission said. Those are likely additional jobs for people already with work, Hatchitt said.

Oil, Gas Prices

Oil prices, which are down about $73 a barrel from 2008’s all-time high, are more than 6 percent above their five-year average in New York futures trading. Gas futures are trading at less than half their five-year average.

Producers are idling drilling rigs accordingly. The number of oil rigs active in Texas dropped 45 percent in the past year to 100, according to a count by Baker Hughes Inc. The number of active gas rigs fell by more than 500, or 68 percent. Gas still accounts for more than 70 percent of Texas rigs in service.

The shift to gas in a state famous for its oil gushers, including Spindletop, the 1901 discovery that swelled Beaumont’s population fivefold in one year, accelerated in the early 1990s with the development of a new technique for tapping fuel beneath shale formations. Such projects drove a jump in output last year that created a gas surfeit, which along with the recession dragged down prices.

“In many ways, it’s like the technology has been too successful,” said Robert Gilmer, senior economist at the Federal Reserve Bank of Dallas.

About 12 percent of Texas job losses since December were from the oil and gas industry, according to state figures.

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