Louisiana’s gross domestic product (GDP) increased by 3.2% in the second quarter of this year, putting Louisiana in the top 10 among the 50 states for its rising value of goods and services, the federal Bureau of Economic Analysis (BEA) reported.
But observers of the state’s economy disagree about whether the jump in Louisiana’s fortunes will continue.
“There is some hope that things were turning the corner for the Louisiana economy after the state’s unexpected increase in reported economic output in the second quarter of 2023,” Vance Ginn, chief economist for the Pelican Institute for Public Policy, told the Louisiana Record in an email. “However, this appears to be short-lived as there have more recently been job losses across the state with workers in key industries taking a large hit in both job losses and wages not keeping up with inflation.”
With a new governor taking office in January, however, the state could take a more productive economic path based on responsible budgeting, income tax cuts and regulatory relief, according to Ginn.
Dr. Patrick Scott, director of the Center for Economic Research at Louisiana Tech University, expects a long-term boom driven by industrial expansion in southern Louisiana.
“As it turns out, if you look at that 3.2% growth that Louisiana enjoyed in the second quarter, 2.8 points of that is in just two sectors of the economy,” Scott told the Record. “One of the sectors is very understandable, and that’s something called the nondurable goods growth sector. That is the sector where Louisiana is enjoying just an amazing boom.”
Driven by the availability of cheap natural gas and access to shipping lanes to the Gulf of Mexico, chemical companies are expanding or building new plants near the Calcasieu Ship Channel in Lake Charles or along the Mississippi River between New Orleans and Baton Rouge, he said. These are companies that make goods using natural gas, such as fertilizers and plastics.
“These firms are among the highest-wage firms in the state,” Scott said. “... Importantly, they are ones with a very large multiplier effect.”
In fact, six jobs spring up elsewhere when one of these industrial jobs is created, he added. The state has $34 billion in such projects under construction, with $121 billion in projects on the drawing board, according to Scott.
“The primary reason this is happening is because of the huge gap between the price of natural gas here and the price of natural gas in Europe and Asia,” he said.
Louisiana’s liquefied natural gas exports are also leading the nation, according to Scott, as U.S. companies work to meet the European demand for natural gas. Russia cut back on energy exports to European nations after their decision to send arms to Ukraine to counter the Russian invasion.
The part of Louisiana’s GDP growth that is more difficult to understand is the expansion of oil and gas extraction, Scott said, noting that oil and gas prices have been weak in recent months. One explanation for this extraction growth, which saw an increase in 1,700 jobs, is a slight expansion of drilling activity in the Gulf of Mexico and a technological breakthrough by Chevron, he said.
“About a year and half ago, Chevron broke the technological code on how to drill in high-temperature, high-pressure waters,” Scott said, adding that this has opened up new areas of the Gulf for drilling.