Scott: U.S. economic recovery slow in delivery

In his anticipated annual review and projection of Louisiana’s financial picture, LSU economist Loren Scott told corporate and government leaders on Thursday that an indication of the economy being bad is when jury duty is considered a good paying job.

Mixing light humor with hard statistics, Scott told a full house at the Cypress Columns that economic projections into 2012 and through 2013 offer slight employment recovery at levels of 0.8 and 0.9 percent for each respective year, but will result in being approximately 3,600 positions lower than full-time job levels at the beginning of 2008 and the onset of the Great Recession.

“The recession we’ve just got done going through was very, very long,” Scott said. “When you compare it to the previous recession, it was the longest recession we’ve had since the Great Depression, but nowhere near as bad as the Great Depression … although it is the deepest [recession] we have had since World War II.”

For Louisiana, a downturn of economic conditions during the first decade of the 21st century was influenced further by repeated damage resulting from hurricanes Katrina, Rita, Gustav and Ike, the BP Deepwater Horizon explosion and oil release in April 2010, the offshore drilling moratorium and what has been termed as the permitatorium, a lag in restoring petroleum production permits to pre-BP spill levels.

Scott presented Louisiana’s economic profile divided into eight Metropolitan Survey Areas, comprised of 29 parishes, and 35 rural parishes. Terrebonne and Lafourche parishes comprise the Houma MSA. St. Mary Parish is listed among the rural regions.

Scott said the eight Louisiana MSA’s are as varied as vehicles in a parking lot during the 1950s, when it was easy to tell one make and model from another, and before automobiles all started looking the same.

The two MSA’s with the most common characteristics are Houma and Lafayette, where both have high concentration of firms associated with oil and gas extraction. Each is impacted by fluctuating energy prices. The significant difference for Houma MSA is its presence of shipbuilding, fabrication, machinery and water-borne transportation.

In September 2008, oil prices increased to a high of $132.61 a barrel. The price of oil then slid to a low of $39.06 by March 2009. Oil prices rebounded to a high of $85 a barrel by August 2011.

However, even with a positive trend in oil prices, the Houma MSA was the first MSA in the state to begin losing jobs as a result of the Great Recession. During the period of 2009 and 2010, the MSA lost approximately 4,800 jobs. “It is historically unprecedented for this MSA to be losing jobs in the face of relatively high energy prices,” Scott said.

The poor jobs performance was linked by Scott to President Barack Obama’s proposed taxes on the oil extraction industry.

During 2011, seven deepwater drill ships left the Gulf of Mexico. In turn, activity at Port Fourchon, which services nearly 90 percent of all offshore platforms and drilling ships in the Gulf of Mexico, has been close to 40 percent less than that of pre-spill levels. Normally, Scott said, that would translate into a major job decline.

The difference came with damage payments delivered by BP. Terrebonne Parish listed $132.1 million in claims, and Lafourche Parish posted claims totaling $81 million. This helped stabilize economic conditions. In turn, Houma MSA added almost 4,000 jobs during the later part of 2010 and first half of 2011.

Scott projected that in 2012 and 2013, the Houma MSA will be the third fastest growing region of the state, but growth will translate into only about a 1 percent boost in jobs during that two-year period.

In his economic forecast, Scott pointed out the Edison Chouest and the Bollinger Shipyards as the two firms that plan to add a combined 1,500 jobs between now and the end of 2013.

Gulf Island Fabricators plans to add 300 positions during the remainder of 2011 and is expecting to bring on an additional 100 workers in 2012. “The firm’s concern is what happens after mid-2013,” Scott said.

A change for the Houma MSA will arrive in 2012, when an injection of BP payments ends. This loss of one time income could be offset with the addition of industrial jobs.

Scott explained that the reason Louisiana was not as severely hit by the Great Recession as other parts of the nation was because while 6.4 percent of unemployment in other states is related to durable goods, that number drops to 4.6 percent of jobs in Louisiana.

A second help to Louisiana was that up until the end of 2001, the oil and gas extraction industry was doing well, and even experienced a mild recovery from the economic downturn following the Sept. 11, 2001 attacks by 2003.

Scott issued a forecast for oil prices to average $95 a barrel during 2012 and 2013. With that comes an activity range with prices as low as $80 and as high as $110 a barrel. Natural gas prices are expected to remain relatively low at about $4 per 1 million British thermal units.

Added benefits could rise with prospects coming from a shale belt across the middle of the state that will still require support industries that originate in the Houma MSA. The primary negative Scott projected in this in uncertainty associated to federal regulatory changes.

Scott referred to economic advancements during the next two years as being painfully close and “tantalizingly out of reach.” During both 2012 and 2013, job growth is expected to be less than 1 percent.

Scott did not predict how many people looking for extra work might be signing up for jury duty.