Work on $103 billion in industrial development and expansion is the primary factor in Louisiana’s expected job growth of 66,700 over the next two years, with New Orleans projected to add 17,300 jobs, 3.1 percent over the two-year period.
“Louisiana is in the midst of an industrial boom unlike any other in our history, with over $100 billion in industrial projects either under construction or at the front-end engineering and design phase,” LSU economists Loren C. Scott and James A. Richardson said Wednesday in their annual two-year forecast.
There is $13.7 billion in industrial projects announced for the New Orleans area, $3.6 billion of which are already under construction. This does not include another $2 billion by the U.S. Army Corps of Engineers and $826 million in improvement to the Louis Armstrong Airport.
Both the LSU Health Sciences Center and the VA Hospital will open over the forecast period, adding another 2,100 high-paying jobs. The cherry on the top will be three new high-tech firms, new additions at the port and Michoud, and the end of the bleeding from the Avondale Shipyard.
At the end of the two-year period, the New Orleans area will remain 48,200 jobs, or 7.8 percent, below its previous 2001 peak employment. Its growth rate through 2016 will rank fifth among the state’s eight metro area MSAs, mainly because of spectacular growth projected in the chemical corridor and the oil patch driving the state economy.
“If our forecasts are near the mark, sometime in 2015 Louisiana will have more than 2 million nonfarm employees for the first time in its history,” the report said.
That growth, however, will divide Louisiana into two unequal halves, the economists wrote.
“The outlook across Louisiana’s eight (metropolitan statistical areas) is almost split along Interstate 10,” the pair noted. “Those MSAs along and below that interstate will enjoy very good growth. MSAs above I-10 are likely to experience only modest employment gains.”
The report by Scott and Richardson was published by the Division of Economic Development at LSU’s E.J. Ourso College of Business.
Ongoing projects totaling $16 billion are expected to boost employment in the Baton Rouge area by 19,600 by the end of 2016, the economists reported. That would be an uptick of 4.9 percent.
However, neither of the state’s two largest metro areas will lead the state in rate of employment growth, the economists predicted.
Jobs in the smaller Lake Charles area are expected to grow by 12,000 — an increase of 12.1 percent.
“We have run out of adjectives to describe the industrial boom underway in the Lake Charles MSA,” the economists wrote. Planned projects in that area total $81.7 billion.
Of that total, $30.2 billion is under construction. That figure is “7-10 times larger than we would typically report for the whole state in the past.”
Added Richardson and Scott: “From an industrial standpoint, over 92 percent of the value of (these) announcements is in the chemical industry. Geographically, the announcements are clustered in the Lake Charles area and along the Mississippi River from Baton Rouge to New Orleans.”
Both regions, Scott and Richardson said, have the key ingredients that chemical firms covet: an ample supply of natural gas and supply of water from the Mississippi River, the Gulf and Calcasieu Ship Channel; and viable waterways for moving their bulk products by barge or ship.
The workforce in the Lafayette metro area should grow by 5,700 over the next two years, the economists predicted, a jobs boost of 3.5 percent.
In addition to increased work in the oil and gas service industries and growth of an ambulance service, Scott and Richardson said the Lafayette area also has become home to a helicopter manufacturer and three high-tech companies.
In the Houma-Thibodaux area, growth in oil and gas drilling in the Gulf of Mexico and expansion of service facilities at Port Fourchon should increase employment by 4,500 over the next two years, the economists said. That would be a hike of 4.4 percent.
As for the metro areas north of I-10, the economists projected Shreveport-Bossier City’s workforce will grow by 2,700 — a two-year boost of 1.6 percent.
The Alexandria area should draw 700 new jobs, an uptick of 1.1 percent.
Monroe is expected to increase its workforce by 1,000 — a two-year gain of 1.0 percent.
Scott and Richardson said several of Louisiana’s longtime strengths often help insulate the state from national and international economic downturns.
Louisiana is the nation’s No. 2 producer of oil and natural gas, if production from the federal waters in the Gulf is included, has the nation’s second-largest concentration of refinery capacity and has enough miles of pipelines under it to circle the globe 4.5 times, the economists observed.
Strengths, however, can be transformed into weaknesses by unforeseen events, Richardson and Scott added.
“That same huge concentration of energy firms can also send the state into a steep downturn … if oil and natural gas prices fall significantly,” the analysts said.
Scott and Richardson said they based their two-year forecasts on a wide range of oil prices — from a low of $85 to a high of $120 per barrel.
Because 67 percent of the world’s oil reserves are held by nationally owned oil companies, the pair said, the price of oil can be manipulated by politics rather than established by profit motives.
“When (Hugo) Chavez took control of Venezuela’s oil markets, that country’s production dropped from about 3.6 million barrels per day … to 2.5 (million barrels per day) today,” the economists said.
“It was a sudden boost in production by the Saudis in the early 1980s that caused a collapse in oil prices,” they added.
As for a possible nationwide recession, most forecasters don’t see one on the horizon, Scott and Richardson said.
“Readers should be aware there is at least one contrarian view,” the pair reminded.
“David Levy writes the Levy forecast, a newsletter his family has produced since 1949,” Scott and Richardson noted. “Levy states the U.S. will fall into a recession in 2015, triggered by a severe downturn among the country’s key trading partners.”
Added Richardson and Scott: “One could just ignore his projection as extreme, but for the Levy family tradition of hitting on forecasts against the crowd.
“His grandfather Jerome called the Great Depression in 1929,” the economists said. “His father Jay said just after World War II the economy would boom, when others were projecting a depression. His uncle Leon Levy called the dot-com crash in 1999 a few months before that event occurred.”
Scott and Richardson said they hope David Levy’s prediction of a 2015 recession is wrong.
“If he is right,” Scott and Richardson said, “all of the projections about oil prices and investment plans in Louisiana will be off the mark.”