The Acadiana economy appears to have hit a turning point in its recovery from years of record-low oil prices that sets the stage for growth over the next two years.
Last year, an annual economic outlook conducted by economist Loren Scott predicted that Lafayette would only add 1,400 jobs in 2019 but the region has gained 2,500. It’s a major change from when the region was bleeding jobs — 20,900 lost between 2015 and 2017. This year's report was co-authored by Gregory Upton Jr., assistant professor and researcher at the LSU Center for Energy Studies.
Scott spoke Wednesday morning in Lafayette during One Acadiana's An Expert Perspective program.
In 2020, Lafayette is projected to add 3,200 new jobs, or 1.6%, and another 4,000 jobs, or 1.9%, in 2021 in the latest forecast. Overall, Louisiana is expected to add 24,700 jobs, or 1.2%, in 2020 and another 28,800 jobs, or 1.4% in 2021. Eight of the state's nine metro areas show growth, with Alexandria projected to be flat. By contrast, a survey of professional forecasters conducted by the Federal Reserve of Philadelphia projected nonfarm employment to grow by only 1.52% in 2019 and 1.12% in 2020 — but did not project out to 2021.
Scott will deliver his 2020 outlook Wednesday in Lafayette at an event sponsored by One Acadiana.
There are three factors that are difficult to factor into the forecast, Scott said: the possible impact of the U.S. trade war with China, whether rig counts have already hit rock bottom and how much of an impact the attacks on oil processing facilities in Saudi Arabia may trickle down to the Gulf Coast.
Most of the bullish forecast hinges on a stronger oil and gas industry because about 6.2% of all jobs in Lafayette are directly tied to oil exploration compared to 1.8% as the state average.
And there has been some uptick in the oil and gas industry. There were 23 oil rigs in the Gulf of Mexico during the week of Sept. 18, up from only 18 oil rigs in the Gulf one year ago — an increase of nearly 28%.
It’s hardly a booming economy, though. The price of Louisiana sweet crude was selling for about $97 per barrel in 2014. At the time there were more than 60 oil rigs in the Gulf. Still, the forecast is cautious but optimistic.
"We have not received a lot of reassurance that a significant inflection point has been reached," Scott said. "We are forecasting that the Gulf of Mexico is on the cusp of recovery.”
Scott predicts that the offshore oil rig count will grow to between 33 and 35 in the next two years. Much of the optimism is drawn from technological innovations that have driven down production costs significantly so companies can still break even when oil is selling for $30 per barrel.
But two other economists are wary about such an optimistic forecast while a third concurs with some of the findings.
“It’s a good conventional wisdom forecast, however, the economics underpinning all of the potential projects and their associated employment are very tenuous right now,” said David Dismukes, head of LSU’s Center for Energy Studies. “We’ll be lucky to see relatively flat employment over the next two years."
Gary Wagner, professor of economics at the University of Louisiana at Lafayette, said it's unlikely Louisiana would grow faster than the national average over the next two years.
Most of Lafayette's jobs gains has not been in oil and gas, rather in education and health care, Wagner said.
"The job growth has not been nearly strong enough to offset losses," Wagner said. "I still see the area growing but at about half the pace."
That's because even if there is an oil and gas industry recovery the industry doesn't require nearly as many workers due to technological innovation but there's also slack in the market that could soak up gains before companies begin hiring workers again.
"We still have a number of supply boats parked at Port Fourchon, we are not at all bullish about shallow water oil production," said Eric Smith, associate director of the Tulane Energy Institute in New Orleans.
It's likely that the first round of liquefied natural gas projects could complete construction, but the second round may not make it as more countries prepare to export LNG themselves, especially in Africa.
"We're a little less sanguine with the increasing international competition," Smith said.
Lafayette has been diversifying its economy, with some job growth tied to businesses outside of oil and gas.
For example, home health service company LHC has been on an acquisition spree and acquired a dozen of its competitors nationally in the past year. LHC expects to wrap up a $47 million expansion of its headquarters in 2020. Technology company CGI already has about 400 employees in the region and expects to double that in 2020. Food delivery technology startup Waitr employs about 350 tech workers in addition to 100 drivers, but its future is “muddy” since the CEO resigned in recent months and the company faced pushback from local restaurant owners over new contracts post-IPO.
Acadian Ambulance remains the largest employer, with more than 1,300 workers, and it's seen demand for its oil and gas safety management division driven by new pipelines.
"Having a somewhat diversified workforce really paid off for Lafayette," Scott said. “We are projecting that the Lafayette economy will enjoy a significant job spurt."
Chart Industries already won a contract to build cold boxes for Driftwood LNG and Venture Global LNG — as a result it expects to have 350 workers by the end of this year and add up to 600 in the future.
Here’s what to expect in the other metro areas:
BATON ROUGE: The Capital City is expected to grow slightly over the next two years and mostly track the state average. The projected growth is seen as the end of an economic lull as new jobs for industrial projects pick up again, with petrochemical industry expansions at Methanex, Shell, Shintech and ExxonMobil. The Baton Rouge metro area is expected to add 5,700 jobs in 2020, an increase of 1.4%, and another 6,000 jobs in 2021. Since 2012, petrochemical companies have announced $16.8 billion of industrial expansion projects but $11.5 billion of those projects are either under construction or have been completed in the Baton Rouge region.
NEW ORLEANS: The Crescent City is anticipated to add 9,400 jobs in 2020, up 1.6%, and another 10,100 jobs by 2021, or 1.7%. Most of that growth is tied to parishes surrounding the city, where there are plans for major industrial plants, LNG export terminals and a liquids terminal. Since 2012, about $57 billion of industrial development has been announced and only $14 billion of work has been completed. Venture Global is expected to make a final investment decision for its $8.5 billion LNG export terminal at Plaquemines Port in 2020. Formosa Plastics will decide in 2021 about its $9.4 billion for a new ethane cracker plant. One project that might not be built is the Wanhua Chemicals proposed $1.25 billion polyurethanes plant in St. James Parish, since the company discovered tariffs against Chinese goods would roughly double the construction cost. In Plaquemines Parish, two more LNG terminals — Delta LNG by Venture Global worth $8.5 billion and Point LNG’s $3.2 billion — are expected in the coming years.
LAKE CHARLES: The petrochemical industry continues to drive much of the economy in the Lake Charles metro area and a recent lull between construction projects is expected to end next year. There are $57 billion in projects planned for the Lake Charles metro area. This year, Venture Global LNG made a decision to move forward on its $5.8 billion Calcasieu Pass LNG export terminal. Lake Charles is projected to add another 3,000 jobs by 2020, up 2.5%, and another 3,800 jobs, or 3.1%, in 2021.
HOUMA-THIBODAUX: The Houma metro area is closely tied to the oil and gas exploration industry and is particularly sensitive to activities in the Gulf of Mexico. About 7.2% of the jobs in the local metro area were in the oil and gas extraction sector this year, including shipbuilding businesses that build supply boats to service oil rigs. The Houma region is expected to add 1,500 jobs in 2020, up 1.8%, and another 3,000 jobs, or 3.5%, by 2021. That growth hinges on an increase in the oil rigs in the Gulf of Mexico.
HAMMOND: Major employers in the region include North Oaks Medical Center, Southeastern Louisiana University and the government. North Oaks had been losing money for several years but broke even in fiscal 2018 after some state aid. Enrollment at the university has not been growing either. The local metro area is expected to add only 100 jobs in 2020 and another 100 jobs in 2021 for a growth rate of 0.02% for the next two years.
SHREVEPORT-BOSSIER: The Shreveport-Bossier metro area has been losing jobs since 2008, but the “slide will end” and the region is expected to add 300 jobs in 2020, up 0.02%, and another 300 jobs in 2021. The recovery is led by new activity at the Port of Shreveport-Bossier and the General Dynamics Cyber Innovation Center, but also a small boost from expansion in the Haynesville Shale, which supplies natural gas feedstock to chemical and LNG export facilities.
MONROE: The Monroe metro area is expected to add 200 jobs by 2020, up 0.03%, and another 200 jobs by 2021. Those modest gains are expected to be driven by Vantage Health Plan's growth and stable employers like IBM, Chase Mortgage Processing and Graphics Packaging. CenturyLink has also committed to keeping its headquarters in Monroe until 2025, which adds stability to the region.
ALEXANDRIA: The Alexandria area is expected to stay stable but will remain flat for the next two years. If a new client at the old International Paper site is secured, it could create jobs in the region. Major employers are P&G, Crest Industries, Union Tank Car, Cleco and England Airpark.
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