Harlan Kirgan
Economist Loren Scott said the Lafayette area will lose about 800 jobs in 2018, but should experience a recovery in 2019 with the addition of 1,600 jobs.
Scott made his 14th annual Louisiana Economic Output report to One Acadiana in Lafayette on Thursday morning.
“Louisiana is finally emerging from a 20-month recession due to a dramatic downturn in the state’s oil patch,” the report states.
Higher oil prices are going to drive economic growth in the Lafayette Metropolitan Statistic area of Lafayette, Acadia, Iberia, St. Martin and Vermilion parishes, the report states.
“The good news is the recovery will be bolstered by a slightly faster growing national economy, low inflation, and only a slight increase in interest rates,” the report states.
“I really, unfortunately, don’t see you getting back to where your were when the price was a $100. When the price is a $100 you are like a gold mining town...” he said.
“While the bloodletting has slowed in the oil patch, oil prices in the $52-$58 a barrel range means exploration in the Gulf of Mexico will only recover modestly at best. That means the oil patch will remain sluggish over 2018-19,” the report states.
The Lafayette area derives 6.8 percent of its jobs directly from the exploration industry, which compares to the state average of 1.6 percent, the report states.
“Solid performance in Lafayette’s Big Four — Stuller Settings, Acadian Ambulance, the Schumacher Group, and LHC — will help lessen the bite from a still recessionary oil and gas extraction sector. Over a $60 million boost to the state road lettings budget in this region will help as well,” the report states.
Efficiencies and price pressure on suppliers is helping the oil and gas industry to lower its break even point, he said.
The Gulf Coast economy offers a range of contrast.
Lake Charles has $126 billion in industrial announcements bolstering its ranking as one of the fastest growing metropolitan areas in the nation.
“As you start to work your way across, you start getting into sectors of the economy that are heavily tied to offshore. If your are heavily tied to offshore Gulf of Mexico, the Gulf of Mexico is not doing the same thing as the shale play,” he said.
Scott noted that boat-builder Metal Shark shifted its production to contracts for Navy vessels.
The Trump Administration is bringing a relaxation of what Scott calls a “tsunami” of regulations under President Obama. There is also a forecast of tax cuts under Trump. Both, he said, would be mean a cost reductions to the industry, which should mean more jobs.
“We should quit thinking that two and two and half percent is normal. That is not normal. That is the result of bad policies. Normal is 3 percent and 3.5 percent,” he said of the nation’s economic growth.
As for the Lafayette area, “The decline from $105.71 a barrel in August 2014 to a low of $27.76 in January, 2016 has had its usual effect on the very oil-dependent Lafayette MSA. Even with oil prices recovering into the $50 a barrel range, employment losses in the Lafayette MSA continue to mount.
“Among the recent causalities was the closure of Chevron’s Shelf Office (though the firm is maintaining an Emergency Response Center in Lafayette). Baker Hughes closed a cement and pumping division in Crowley that employed 200 people at one time. Blue Sky Innovations — a firm providing support to helicopters servicing offshore work — shed 58 jobs. At the Port of Iberia, Dynamic Industries completed the module for Shell’s Appomattox Platform and dropped its workforce from 500 to 350.”
Scott estimates the region will have lose 23,500 jobs from 2015 to 2017 — a 10.6 percent decline.
In rural Louisiana, which includes St. Landry and Evangeline parishes, Scott forecasts stability. The are among the 29 parishes having an agricultural base.
Rural parishes should add 2,300 jobs for a 1 percent job growth in 2018 and another 2,200 jobs in 2019, also a 1 percent job growth, the report states.
Bright spots in the rural economic outlook include:
— Metal Shark Boats, a company that manufactures vessels out of aluminum. Starting with only 40 employees and one facility in 2014, Metal Sharks now has about 160 employees and three facilities. The firm is adding a finishing plant for painting and blasting, a new administration building, and a large vessel fabrication facility. Metal Sharks was selected by the Navy to build Near Coastal Patrol Vessels for U.S. partner nations. In June, the company landed a $54 million contract for 13 welded aluminum cutters, and recently the company completed six 88-foot high-speed passenger vessels for the New York Ferry Service. It delivered the first six of 18 45-foot patrol boats to the Vietnam Coast Guard.
— Large sums of money are being spent to build pipelines mainly in rural areas. Kinder Morgan is spending $170 million to build a pipeline called the “Southwest Louisiana Supply Project”. Tennessee Gas Pipeline will employ 300 people to build a natural gas compressor station in Franklin Parish and extend its compressors and pipelines in Madison Parish. Total project cost is $170 million.
— The Hazelwood Energy Hub project near Port Barre is at the permitting stage. A $400 million project to store and blend 10 types of oil held in storage tanks and salt domes, this facility will employ 123 people at $63,500 annually.