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The tale of two Louisiana economies

Written by  // Wednesday, 24 July 2013 13:35 //

moretFor months, Gov. Bobby Jindal has boasted that Louisiana has a lower unemployment rate than the national average.

 

If current trends continue, that won’t be true for long.

Figures released last week showed that Louisiana’s unemployment rate rose in June for the sixth straight month, from 5.6 percent in December to 7 percent in June. The national rate has dropped a couple of notches during that time, from 7.8 percent to 7.6 percent.

“We seem to be converging and may see those two lines cross each other,” said Greg Albrecht, the chief economist for the state Legislative Fiscal Office. “We’re getting back to our normal position.”

Louisiana has had a higher unemployment rate than the national average for most of its recent history, according to a chart regularly updated by Albrecht. It shows that Louisiana had a higher rate throughout the 1980s and 1990s and matched the national rate in 2003. Immediately after Hurricane Katrina, it dropped below the national rate. It has remained there during Jindal’s 5 ½ years as governor, as he often points out.

louisiana-economy

Greg Albrecht / Louisiana Legislative Fiscal Office

For the last 30 years, Louisiana's unemployment rate generally has been above the national average. The state rate spiked after Katrina and then plummeted. It's been below the national average since then. In the last six months, the state rate has risen while the national rate has fallen.

The state’s unemployment rate appears to be increasing because the private sector is not creating enough jobs to offset the cuts in government positions, economists said. At the same time, more people have decided to enter the labor market, but they haven’t found work.

The federal Bureau of Labor Statistics measures employment in two different ways.

One measure, called the Current Population Survey or the household survey, shows that in June, 20,000 fewer people were employed in Louisiana compared to December, and 30,000 more were unemployed.

According to a different survey, called the Current Employment Statistics or the employer survey, 1,100 more people were employed in Louisiana in June than December.

The household survey shows 6,000 more people working in the private sector since December and 4,800 fewer people working in government.

Most economists believe that the employer survey is more accurate because its sample is larger. In fact, economist Loren Scott doesn’t trust the unemployment numbers. “You get weird data like the present trend showing our unemployment rate moving to the national level, when we are one of a handful of states in the nation that has more people employed today than in Jan. 2008,” Scott wrote in an email. He was referring to figures from the employer survey.

Gov. Kathleen Blanco worked tirelessly to bring jobs to Louisiana at a time when Louisiana’s unemployment rate dropped enough to match the national average. And practically every week, Jindal travels somewhere in the state to highlight a plant opening or expansion. Monday, he announced a $2 million expansion at American Tank Co. in New Iberia, which will add 20 jobs.

But economists say that factors outside a governor’s control — national and international trends, hurricanes and Louisiana’s continued, if diminished, dependence on the oil and gas industry – play the biggest role in determining job growth in the state.

“From 2006 on — when the rate is below the national — is just the post-Katrina (and Rita and Ike) reconstruction boom,” Dave Norris, director of the Enterprise Center at Louisiana Tech University in Ruston, said in an email. “Tons of federal money coming in for reconstruction, fewer people in the state after the displacement due to the storms, etc. As that has faded over the last couple years, we are creeping back up to the national average. And barring another hurricane reconstruction boom, we will return to the typical state as before.”

HOW BRIGHT IS LOUISIANA’S ECONOMIC FUTURE?

Stephen Moret, secretary of Louisiana Economic Development, said by email that the state has a good jobs outlook.

Louisiana will be the epicenter of the industrial rebirth in the U.S., as tens of billions of dollars of new manufacturing projects will break ground over the next three years. Additionally, I expect Louisiana will be one of the fastest growing states in the country in software development over the next 3-5 years. Deepwater drilling activity is expected to jump by 50-100 percent over the next few years, which will result in thousands of new jobs in our state. Once the big chemical and energy expansions begin full operations, I expect we also will see a jump in activity in the Haynesville Shale, with a partial recovery of natural gas prices. We also expect to make a number of significant announcements in advanced manufacturing, such as automotive and aerospace.

Norris seems less optimistic about the state’s job growth prospects. “In general, at least since the 1960s, Louisiana has been a state with lower education levels, higher poverty, poor health, low wages, and volatile employment due to our dependence on oil and gas,” he said. “All these things lead to higher levels of unemployment overall and they tend to persist over time.”

NATIONAL ECONOMIC TRENDS AFFECT LOUISIANA DIFFERENTLY

National economic trends tend to have less of an impact on Louisiana than other states, according to economists.

Jim Richardson, an economist at Louisiana State University, said the state’s economy usually marches to a different beat than the national economy because of oil and gas. The drop in oil and gas prices in the early 1980s “was positive for almost everyone else because it meant cheaper oil prices,” Richardson said. But the state lost almost 100,000 jobs in that industry in the 1980s.

“In the 1990s, the national economy did well,” he said. “Louisiana grew, too, but not as well as the rest of the country. We created 35,000 jobs per year. But we needed 60,000 jobs per year to keep up with neighboring states, which outperformed the national average.”

The Great Recession, beginning in 2007, had less of an impact on Louisiana, Richardson said, “because we did not have sub-prime loan problems. We did not have a big durable goods economy like the Midwest, or a big financial sector. The big drivers of the national downturn were not present here.” Meanwhile, the federal government and private insurance were spending billions on hurricane recovery in Louisiana.

As for the current economic climate, Richardson said, “Jindal can reduce the size of government, but he can’t unleash the private sector by himself.”

by Tyler Bridges

 (Photo above: Stephen Moret)

Click here to read the original story with links

TheLensThis story was reported by The Lens, an independent, nonprofit newsroom serving New Orleans.

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