Low energy prices will stunt Louisiana’s economy over the next two years, although massive industrial projects will help drive job gains in the Baton Rouge and Lake Charles areas, an economic forecast shows.
“Louisiana Economic Outlook: 2016 and 2017” projects Louisiana will add 15,400 jobs in 2016 and 19,600 in 2017. The report divides the state into three segments: the rapidly expanding Baton Rouge and Lake Charles regions; “the languid” northern tier; and an oil patch where the suffering isn’t over.
“Normally these numbers would be a lot better except for what’s going on in the oil patch,” economist Loren Scott, co-author of the report, said during Wednesday’s Louisiana Business Symposium.
BATON ROUGE: The capital area will see the biggest employment gains. The Capital Region is expected to add 8,900 jobs in 2016 and 6,200 jobs in 2017.
“The authors have been monitoring the Baton Rouge economy for 40 years. We have never seen an industrial expansion like the one underway in this MSA (metropolitan statistical area),” economists Scott and James Richardson say in the report.
There are $8.1 billion in announced industrial expansions in the area, and almost all of them are already under construction. This means industrial construction for the area will likely peak next year and drop off in 2017.
The area’s growth would be even stronger but for the loss of corporate headquarters for home health giant Amedisys Inc. and specialty chemical maker Albemarle Corp., the report says. Economic developers fear Amedisys, after moving 33 top executives to Nashville, Tennessee, also will shift the remaining 500-plus jobs in Baton Rouge to Tennessee.
The economic forecast also says new federal ozone rules could raise electricity rates so much that Baton Rouge may not be able to compete for new industry.
Scott said the narrowing gap between the price of natural gas in the U.S. versus Europe and Asia may also slow industrial growth.
The major reason the U.S. chemical industry grew in recent years, and so many petrochemical plants have expanded or grown, is the low cost of natural gas, a feedstock and fuel for the facilities, Scott said. The U.S. price has been a fraction of that in Europe or Asia, where prices are pegged to oil.
But with oil at half of what it was a year ago, the gap has narrowed enough to make some firms take their foot off the accelerator on some of the proposed plants or expansions, Scott said.
Baton Rouge Area Chamber Chief Executive Officer Adam Knapp said the forecast, by and large, has accurately predicted the performances of some very complex regional and state economies.
“His (Scott’s) forecast, 2.2 percent growth for 2016, that sends a very strong signal about where Baton Rouge is going to be expected to be performing in the coming year,” Knapp said.
The area has seen continued, steady project work every year for the past five years, Knapp said. Each year builds upon the prior year to accelerate growth, and those layers of activity ripple through the entire economy.
The result has been low unemployment rates and steady job growth, he said. The projected 2.2 percent growth for 2016 would place Baton Rouge among the nation’s fastest-growing regions, an exciting prospect for a lot of business owners.
Scott and Richardson’s economic forecast is based on a number of assumptions, including a turnaround in oil prices — $55 a barrel in 2015 and $60 a barrel in 2016 from the current mid-$40 range.
“When energy prices are strong, the state prospers. When oil prices are declining, it is tough — especially for certain areas of the state,” the report says.
NEW ORLEANS: One of those areas is New Orleans, the state’s largest metro area. The region is expected to see “meager growth” in 2016, adding 2,900 jobs, an increase of 0.5 percent. In 2017, the New Orleans area will add 5,100 jobs, an increase of 0.9 percent.
Layoffs in the energy sector and a drop in U.S. Army Corps of Engineers spending will largely offset employment gains in other areas.
Those include the jobs created by the opening of University Medical Center and Veterans Affairs Medical Center; $1.1 billion in industrial expansions already underway; an $826 million expansion at the airport; a nearly $1 billion condo building boom; and a number of new firms moving to the area.
It’s possible that the New Orleans area could see much stronger growth, the report says. Some $24.6 billion in industrial projects have been announced, almost all of which are in the design or permitting stages.
If most of these projects “go vertical” over the next two years, the forecast for the New Orleans area will be far too pessimistic, the report says. However, there are other areas of concern.
Shell, with more than 2,300 employees and contractors in One Shell Square, and Chevron, with 720 workers in Covington, bear watching, the report says. Both firms plan layoffs of their global workforces, but the local numbers are not known.
In addition, Lockheed Martin, once poised to make liquefied natural gas tanks for export terminals and vessels at Michoud, will shut down by year-end. Renaissance Rx has suspended plans for adding 425 employees to a new headquarters in New Orleans. The Times-Picayune will close its print facility, laying off 100 workers.
In addition, Harrah’s Casino will probably file a lawsuit to lower its minimum employment from 2,400 workers to the 1,800 to 1,900 the casino industry says the facility can realistically support.
LAFAYETTE: The state’s third-largest metro area will lose 2,600 jobs in 2016. But if oil prices bounce back to $60 a barrel — the level projected by the forecast — Lafayette will add 2,000 jobs in 2017.
The area will be helped by the new Bell Helicopters plant opening and the addition of four high-tech firms: Canadian IT company CGI; Enquero, a software technology center; St. Louis-based software developer Perficient; and CSE Icon, a tech consulting firm.
However, it’s unclear whether a handful of previously announced oil and gas company projects will go forward. Those include Danos’ $23.2 million offshore equipment and piping plant at the Port of Iberia; Halliburton’s $45 million manufacturing facility in Iberia Parish; Newpark Mats and Integrated Services Co.’s $41.1 million expansion in Carencro; and Del Corp.’s $4.3 million tank filtration system expansion.
Projections for the state’s other metro areas are:
HOUMA: The energy sector’s pounding will continue. The area will drop 2,000 jobs in 2016 but recover 1,000 jobs in 2017 if oil prices rebound.
LAKE CHARLES: The hottest area in the state, with $39.6 billion in industrial projects underway and $45 billion in the engineering and permitting stages, will add 7,400 jobs in 2016 and 2,000 in 2017.
SHREVEPORT-BOSSIER CITY: It will see an eighth consecutive year of falling employment. The area will lose 800 jobs in 2016 but get those back in 2017.
MONROE: It will continue a 13-year streak of languishing. The area won’t add any jobs in 2016 and 200 in 2017.
ALEXANDRIA: It will continue its modest growth, adding 500 jobs a year. All that will change if American Specialty Alloys follows through with a proposed $2.4 billion, 1,400-person plant.
HAMMOND: Its economy, driven by Southeastern Louisiana University and “an energetic health care sector,” will add 700 jobs in both 2016 and 2017.
Editor’s note: This story was changed Oct. 15, 2015, to correctly say the closure of the Times-Picayune’s print facility is planned.