Thursday, April 18, 2024

Louisiana’s poor economic health requires fast action

by BIZ Magazine
crumpled dollars

The headlines are filled with positive economic news for Louisiana, boasting record-low unemployment rates and impressive job growth. But digging deeper into the data reveals a more nuanced and challenging economic landscape that deserves attention and fast action.

At first glance, Louisiana’s unemployment rate appears to be a shining success at just 3.3%. Gov. John Bel Edwards has been vocal about the state’s accomplishments, boasting a record low unemployment rate, “30 consecutive months of job growth,” and the addition of nearly 280,000 jobs since the pandemic’s peak. But the unemployment rate only tells part of the story.

Looking at the data from before the COVID-19 pandemic, there are 36,329 fewer people of working age in Louisiana, totaling 3.5 million. Even though the number of people actively looking for work has increased by 1,566, many have left the state for better opportunities. This is why the unemployment rate seems lower than it is. Had those 36,329 people stayed in Louisiana to be part of the workforce and unemployment numbers, the real unemployment rate would be 4.9%, which is 48% higher than 3.3%. This statistic challenges the narrative and reveals underlying workforce participation and retention challenges.

Considering jobs added over the last 30 months, the Pelican State has had seven months of declining net jobs in the payroll survey and nine months with declines in the household survey. The latter measure has declined for four straight months, resulting in 17,564 fewer people employed in that period, pointing to a turbulent job landscape.

At the same time, Louisiana’s gross domestic product (GDP) has seen concerning ups and downs. In 2022, the state’s real GDP shrank by 1.8%, making it one of the poorest performers in the nation. The most recent data indicate a modest 1.4% growth in the first quarter of 2023, ranking 31st in the country. These figures reveal economic instability and emphasize the need for a comprehensive approach to sustainable growth.

Finally, assessing personal income figures for state residents reveals additional economic weakness.

The first quarter of 2023 showed more promising trends for state residents’ personal income, with personal income growing at an annualized rate of 6.2%, ranking 27th nationwide. However, that has yet to make up for 2022, when personal income did not grow at all, making Louisiana’s personal income last among the 50 states that year.

The results are in: Louisiana’s economy is lacking, and transformative reforms are vital to unlock the Pelican State’s potential. If Louisiana continues on its current path, it risks maintaining a poor business tax climate, facing ongoing outmigration of residents, and perpetuating one of the highest poverty rates in the country.

Implementing better spending restraint, substantial tax reform, significant regulatory relief, universal education freedom, enhanced workforce development, and improved safety net programs are practical solutions that would empower Louisianans.

Fortunately, a recent poll underscores that these essential reforms are not only needed but also desired by Louisiana’s residents. The Pelican State has the potential to become “the next big thing,” a place where people want to move, provided its leaders take fast action to secure a brighter and more prosperous future for all. This is possible given a new governor and many state lawmakers next year.

Vance Ginn, Ph.D., is chief economist of the Pelican Institute for Public Policy and previously the chief economics of the White House’s Office of Management and Budget. Follow him on at @VanceGinn.

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