Oil and gas activity fueled the economic growth in cities like Lafayette and Shreveport, lifting them to the top 10 ranks when measuring the country’s gross domestic product.
Five of Louisiana’s eight metropolitan regions saw real GDP growth, notably Lafayette, which climbed to sixth place out of 366 metro areas nationwide, according to a recent report by the U.S. Bureau of Economic Analysis. Lafayette’s real GDP grew 8.3 percent, primarily because of oil and gas activity, BEA officials said.
Real Gross Domestic Product is a measure of economic output adjusted for inflation.
At $33.8 billion, the Baton Rouge metro region had the second-highest 2010 GDP in the state in terms of volume behind New Orleans, which saw $64.6 billion in economic activity. However, the Capital Region’s GDP shrank 0.4 percent in 2010 because of downturns in sectors such as construction. New Orleans was up 2.4 percent.
Alexandria and Lake Charles also saw GDP contraction in 2010, according to the BEA report.
Acadiana’s growth was aided in part by rising oil prices, said Jim Richardson, an economics professor and director of the Public Administration Institute at the E.J. Ourso College of Business at LSU. In early 2010, oil was priced at about $75 a barrel. By the end of the year, it was trading for $86 a barrel, about a 15 percent increase.
“So that certainly is a contributing factor,” Richardson said.
Also, the average price of oil in 2009 was about $59 a barrel. In 2010 the average price of oil was about $76 a barrel.
“So that’s one more reason why you expect that particular income source in Lafayette to be jumping,” Richardson added.
Shreveport has the massive Haynesville Shale natural gas deposit to thank for its strong GDP growth. The region’s economic activity grew 7.5 percent in 2010, the ninth-strongest growth rate in the country.
“Haynesville Shale is the big player, and the activity will continue for several years,” noted Richard H. Bremer, president of the Greater Shreveport Chamber of Commerce.
Barksdale Air Force Base in Bossier City is also home to the Global Strike Command, the U.S. Air Force division heading up the country’s intercontinental ballistic missile operations. The Global Strike Command was established in early 2009 and added about 1,000 military personnel to the Shreveport region, Bremer said.
Houma’s economic activity also spiked in 2010, quite possibly because of BP payments resulting from the Gulf oil spill, say economists.
“The payouts… are fairly substantial,” Richardson said. Houma’s “financial activity” sector grew 2.9 percent in 2010, according to BEA data. The region’s overall economic activity grew 4.7 percent, though this could be a one-time spike because of those BP payouts, Richardson said.
“And unfortunately, we won’t know for sure until we’ve had another year or two to kind of have a comparable to it,” Richardson said. “But I believe that’s at least part of the reason why you’ve had this additional push.”
Louisiana’s overall GDP grew 2.6 percent in 2010, the 19th-strongest state in the country. Nationwide, economic activity grew 2.5 percent in 2010, with 83 percent of the country‘s metro areas showing growth. Durable-goods manufacturing led the resurgence in U.S. real GDP by metropolitan areas in 2010, the report showed.
Despite these signs of economic improvement, the country remains weighed down with persistently high unemployment, which remains stuck around 9 percent. Even though the economy is growing, Richardson said, it’s not enough to significantly reverse unemployment.
“I think typically, you anticipate that if there’s certain growth in GDP, then unemployment will fall. But there has to be a certain amount of growth,” he added.
All economic indicators suggest a glacial recovery. A Brookings Institution report released Thursday noted the country’s gross domestic product grew only 1 percent in the first quarter of 2011, compared to the last quarter of 2010.
“Our economy is stuck running in place and running out of breath,” Howard Wial a Brookings fellow and co-author of the report, said in a statement. “There has been very slow growth in jobs and economic output, and house prices and wages are at dramatic lows.”
Louisiana economists agree, noting until economic activity picks up, U.S. unemployment is likely to remain high.
“So we can’t get off that 9 percent number because the growth needs to be much faster,” Richardson said. “If you go back to other recoveries you find our growth rate has been maybe in the 6 percent range for a couple of years. And that gets rid of the unemployment.”
Louisiana’s unemployment rate was 7.9 percent in July.
Job gains and GDP do seem to be related. Louisiana metro regions like Lafayette and Shreveport saw relatively strong job gains in 2010. Between January 2010 and January 2011, Lafayette picked up 2,700 jobs, Shreveport gained 2,100 and Houma added 3,800 according to Louisiana Workforce Commission data. And consequently, Baton Rouge lost about 800 jobs in 2010.
“There’s a connection, obviously,” Richardson said.