Thursday, June 20, 2024

The Report: Economic downtown led by services sector

by BIZ Magazine

An economist says the state, let alone Shreveport-Bossier, will not recover this year from the massive economic downturn caused by the COVID-19 epidemic. 

The hard numbers were laid out during the 39th Annual Louisiana Economic Outlook presented by Dr. Loren Scott, professor emeritus of economics at LSU, on Sept. 16, 2020. 

He noted the Bureau of Economic Analysis has been tracking Real Gross Domestic Product (RGDP) for the past 73 years and the previous worst quarter was a drop of 10% in 1958. In the second quarter of 2020, RGDP fell a staggering 31.7%.

Statewide, April employment data showed a decrease of 271,900, which is -14% overall. The Leisure and Hospitality sector saw employment decrease by -46%, a total of -106,500 employees lost, with the construction sector a distant second at -17%. 

“The Leisure and Hospitality sector is where your casinos are. There were 16,000 people employed in those across the state and those casinos were totally closed down (for months),” said Dr. Scott. 

He added, “This is the first time in history of the United States that a downturn was led by a services sector. Typically, the services sector is kind of an anchor.”

Dr. Scott went on to note that Louisiana is No. 2 in the nation for refining capacity. He pointed out that gasoline consumption dropped -42% in roughly three weeks.

“That really hammered the refinery industry and the first thing they did was start laying off contract workers,” he explained.

His report went on to note the -15% employment in the mining sector, which contains the important oil and gas industry. Oil prices were at $60 in early 2020 and then hit a historic low of $-38 for one day this spring. The good news is that the price of oil had rebounded to $40 per barrel by the end of June.

Oil prices are difficult to forecast, partly due to many oil fields across the globe being in the hands of governments, but Dr. Scott said he sees the price of oil being $45 next year and $49 in 2022. 

“This is not a good forecast for Louisiana. Louisiana needs oil prices in the $55 range,” he noted.

On the flip side, he sees the price of natural gas almost doubling between now and 2022. This is because the rig count dropped from more than 1,000 to 250 currently. 

“In the shale basin, a lot of associated natural gas is un-produced, so the price will go from $1.60 to $3.10. That’s good news for you all because of the Haynesville Shale. I think there’s some good things about to happen there for you folks,” Dr. Scott exclaimed. 

April employment data for Metropolitan Statistical Area (MSA) showed the Shreveport-Bossier MSA had a decrease of -13%, a loss of -23,100 jobs.

“Shreveport-Bossier got hit about as hard as anybody did. One of the reasons for this is because you have the second largest casino market in the state. About 4,800 people were employed in the casinos and these were closed in mid-March and not reopened until mid-June,” said Dr. Scott.

Looking at the economy’s recovery since this spring, the Shreveport-Bossier MSA’s economy kept up with state trends — jobs increased by 49% for an overall job loss of -11,900.

In July, state employment in July rose to -138,200, which is an increase of 49% over the dire April numbers. 

The biggest sector increase was in the State Government sector, which grew by 193%.

Leisure and hospitality rose to -16,900, an increase of more than 50%, while the Construction sector grew by 41%. One of only two negative sectors was the Mining sector, which fell another -12% to reach -6,400 jobs.

– BIZ. Magazine

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