What goes up doesn’t necessarily come down hard, but in the case of Louisiana’s economy, what has been going up isn’t likely to be going up as fast.
The impact of low oil prices is no surprise to those watching the employment data in key cities in Louisiana’s oil patch.
Few have watched the data as closely as Loren Scott and Jim Richardson, the economists whose “Louisiana Economic Outlook” has seen booms and crashes over the decades. It’s striking, then, that the report for the next two years continues to note that Louisiana is still in the midst of an industrial construction boom of the likes that Scott and Richardson have never seen.
What was once a good year of construction at $5 billion or so is today dwarfed by the $60 billion or so in industrial projects underway or in final stages before construction.
And that’s with a slowdown in energy prices having an impact on industrial construction as well as oil and gas exploration, the new report says.
To the extent the industrial construction boom is moderating in the petrochemical corridors along the Mississippi and Calcasieu rivers, it is because lower oil prices have narrowed the gap in price between oil and natural gas. That price delta has in the past few years encouraged companies to make multibillion-dollar investments in plants transforming natural gas into other liquids; as the price of oil has plummeted since mid-2014, those projects have pulled back because the differential in the two prices is much lower than it was with oil at $100 a barrel.
All that said, the new report continues to note the significant growth in petrochemical manufacturing as a huge bright spot, even as the overall job prospects of the state recede a bit.
In New Orleans, the economists project layoffs in the energy sector and a drop in U.S. Army Corps of Engineers spending largely will offset employment gains in other areas. In Lafayette, the state’s third-largest metro area, the authors project a loss of 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 LEO forecasts in recent years have had good news aplenty about economic diversification, with new manufacturing plants like Bell Helicopter in Lafayette and a number of gains in technology companies in New Orleans and Baton Rouge. Still, we’re significantly dependent on oil and gas, either in exploration or in the consumption of oil and gas in refineries and petrochemical manufacturing.
We’re not going up in quite the trajectory that we were, but we’d like to think that the projections of adding more than 15,000 jobs in 2016 and almost 20,000 in 2017 are going to come to pass, helping us continue economic progress in the state.