THE LOUISIANA ECONOMIC
OUTLOOK: 2015 AND 2016
Prepared by:
Loren C. Scott
Professor Emeritus in Economics
James A. Richardson
John Rhea Alumni Professor of Economics
Louisiana State University
And
Judy S. Collins, Managing Editor
Published by:
Division of Economic Development
E. J. Ourso College of Business
Louisiana State University
Baton Rouge, LA
October, 2014
ACKNOWLEDGEMENTS
Tracking data and writing the LEO is a year- long process that requires valuable
input and support from a wide array of people and institutions. This acknowledgements
page is written after the project is finally put to bed, which is followed by a huge
―whew,‖ then a sense of gratitude to all those people who made the final product
possible.
We are so lucky to have the terrific financial support provided by our gold
sponsors---Blue Cross Blue Shield of Louisiana, ExxonMobil, Home Bank, and
Cleco. BCBSLA added to their basic financial contribution by also printing the paper
issues of the LEO. Financial support from these companies not only gets the LEO out,
but it also provides some extra support to a cash-strapped Economics Department at LSU.
Readers may think the LEO information is derived by economists sitting in front
of computers all year. While there is that element, we differ from many other regional
forecasts in that we call about 200 businesses, chambers of commerce, economic
development groups and others around the state. These calls help us get our fingers
on the pulse of the state. These calls generate invaluable information and improve our
forecasts markedly. Many thanks to those of you who accept our calls. You are the best!
There is a special set of people who give an extra effort to get data to us---the
state’s fine economic development community. As you read the LEO, you will discover
the results of their hard work. Our Louisiana Economic Development Department, under
the leadership of Secretary Stephen Moret, has done yeoman’s work in hustling
potential clients, then making sure our incentive packages are competitive without giving
away the bank. At the regional level, excellent economic developers like Michael Hecht,
Adam Knapp, Larry Collins, Courtney Hornsby, Jon Grafton, Greg Gothreaux,
George Swift, Rick Ranson, Eric England, Scott Martinez, Linda Prudhomme, Bob
Fudickar, and Michael Eades are energetically promoting Louisiana. Each goes out of
the way to make sure we are up-to-date on their area. We are very grateful for their help.
Our main man for information on the financial status of state government is Greg
Albrecht with the Louisiana Legislative Fiscal Office. As a fellow economist and
forecaster, Greg has provided valuable insights on doings around Louisiana. Of course,
the great majority of our forecasts use employment data provided by Ramona Robichaux
and other staff members of the Research Division of the Louisiana Workforce
Commission. Thanks for their timely responses to our questions.
Instead of releasing the LEO with a whimper, we get to release it with a bang at
the Baton Rouge Business Report Top 100 Luncheon hosted by our buddies Rolfe
McCollister and Julio Melara. We strive to make the LEO worthy of this grand venue.
Finally, many thanks to our excellent Managing Editor, Judy Collins and to our
new dean Richard White. We are lucky to have you!
ii
EXECUTIVE SUMMARY
In our 33 years of penning the Louisiana Economic Outlook we have observed the
economy go through some wild swings. One time it is a devastating set of hurricanes that
cause a huge, permanent exodus of people from our borders. Another time it is a spike in
energy prices that has parts of the state looking like a gold mining town during the gold
rush days. Happily, our report this year deals with one of those good times. Louisiana is
in the midst of an industrial boom unlike any other in our history, with over $100 billion
in industrial projects either under construction or at the front-end engineering and design
phase. Oil prices have the Gulf of Mexico surpassing pre-spill levels. There is an
abundance of good news to discuss in this year’s edition.
Key factors are driving this boom period, including the following:

Little help will come to the state from the national economy. A recession is not
expected over 2015-16, but real gross domestic product growth should be only
modest, averaging less than 3% a year;

Our forecasts are based on a slight decline in oil prices. Driven by a remarkable
increase in production coming from shale plays, the oil price is expected to drop
from $100 to about $92 a barrel. This price will still make the Gulf of Mexico a
very profitable field for exploration, as will recent changes in Mexico’s laws
regarding U.S. companies drilling in that country’s part of the Gulf;

Natural gas prices are pivotal to our forecast. We expect natural gas prices in
the U.S. to creep up about 20 cents per mmbtu. Importantly, we expect the price
of this fuel in Europe to remain about three times higher, enabling our chemical
industries consume large chunks of Europe’s share of the world chemical market;
Looking ahead to 2015-16, the outlook across Louisiana’s eight MSA’s is almost
split along I-10. Those MSAs along and below that interstate will enjoy very good
growth. MSAs above I-10 are likely to experience only modest employment gains.
 Louisiana’s largest MSA---New Orleans---is projected to add a solid 17,300 jobs
or 1.6% annually. There is a whopping $13.7 billion in industrial projects
announced for this MSA, $3.6 billion of which are already under construction.
This does not include another $2 billion by the Corps and $826 million in
improvement to the Louis Armstrong Airport. Both the LSU Health Sciences
Center and the VA Hospital will open over our forecast period, adding another
2,100 high-paying jobs. The cherry on the top will be three new high tech firms,
new additions at the Port and Michoud, and the end of the bleeding from
Avondale.
 New industrial announcements in the 9-parish Baton Rouge MSA total at least
$16.0 billion, exceeding that of New Orleans. Of this amount $6.6 billion are
already underway. The demand for construction workers has jumped from
iii
17,500 in August 2013 to 28,000 in February 2015---a 10,500 job swing. IBM‟s
Technology Center is under construction, awaiting the 800 jobs at that site. The
19,600 new jobs we are projecting for this MSA over the next two years would
make it the second fastest growing MSA in the state.
 The Shreveport-Bossier MSA has been in an employment dive for four of the
past six years, having suffered the loss of GM, cutbacks at Barksdale and Libbey
Glass, and a plummeting rig count in the Haynesville Shale. We expect this trend
to be reversed over the next two years led by the 800-person Computer Sciences
Corporation coming to the area, along with the continued construction of the new
Benteler Steel Plant at the Port of Caddo-Bossier. Possible defense cutbacks
have us concerned about Barksdale AFB, and there are three gaming
establishments in the MSA owned by Caesar’s Entertainment, a company in
serious financial condition. We have this MSA expanding by 2,700 jobs over
2015-16, ranking it 6th among the eight MSAs.
 The boom in the Gulf drives our optimistic outlook for the Lafayette MSA which
we expect to add 5,700 jobs over the next two years. This performance would
rank the state 4th among the eight MSAs. Oil field service firms such as
Halliburton, Danos, Frank’s International, National Oilwell Varco, and Newpark
Mats are expanding, and three new high tech firms are choosing this MSA for
their homes, creating about 1,100 jobs over our forecast period.
 Like its sister city Lafayette, the Houma MSA is feeding off the surging activity
in the Gulf. Houma should be the third fastest growing MSA in the state, adding
4,500 jobs (about 2.3% annually). Port Fourchon is spending half a billion
dollars on expansions, and the supply vessel maker/operator Edison Chouest is
hiring 100s of shipbuilders and crew members. Fabricator like Gulf Island and
Danos will combine for nearly 700 new jobs over 2015-16.
 We have run out of adjectives to describe the industrial boom underway in the
Lake Charles MSA. We have tabulated a remarkable $81.7 billion in industrial
announcements for the two parish region. Of that total, $30.2 billion are already
underway---a figure 7-10 times larger than we would typically report for the
whole state in the past. One estimate has the need for construction workers rising
by 4,000 in the next 12 months just for the projects that are underway. In
addition the new Golden Nugget Casino will open this December, generating
1,500 new jobs for the region. We project the MSA will add 12,000 jobs over the
next two years---an increase of 12%---making it by far the fastest growing MSA
in Louisiana. We also expect the Lake Charles MSA to break through the
100,000 non-farm jobs barrier in 2015.
 One might call it the CenturyLink MSA. Monroe is expected to be the ―quietest‖
region of the state over 2015-16, adding only 1,000 jobs (+1.0%). CenturyLink
will provide a much needed economic kick to Monroe with its new $30 million
Technology Center for Excellence and the promise of 800 more jobs by 2016.
iv
 The Alexandria MSA has endured 6 straight years of job losses but is poised to
reverse that trend. We project this MSA will add 700 jobs (+1.1%) over the next
two years, ranking it last among the eight MSAs. The new 150-person
Immigration and Customs Transfer facility at England Airpark just opened,
and Crest Industries is in an expansion mode. The big concern for this region is
the expressed interest by some out-of-state parties in buying the 1,200 person
Cleco utility company.
 Percentage-wise we expect only modest growth in Louisiana’s 30 rural parishes.
Readers should be aware that starting next year five parishes---St. James, Acadia,
Vermillion, Iberia, and Webster will be remove from ―rural‖ status and become
parts of MSAs in 2015. This will distort our forecasts as we move into next year.
For the state as a whole, we are forecasting robust progress over the next two
years, adding 34,100 jobs in 2015 and 32,600 jobs in 2016---about equal to the average
growth rate in the booming 1990s. Louisiana began setting employment records in
January 2013 and has been steadily growing ever since. Equally exciting is a new record
on the horizon. If our forecasts are near the mark, sometime in 2015 Louisiana will
have more than 2,000,000 non-farm employees for the first time in its history. It
would be nice if this vigorous growth was expected to be spread evenly across the state.
However, the careful reader will note that growth in the state will be clearly bifurcated.
If a line was drawn along I-10 straight across the state, the really dynamic growth will be
experienced on and beneath that line. Barring some special announcements soon,
expansion in the central and northern regions of Louisiana will be modest at best.
v
Executive Summary Table
Item
BASIC ASSUMPTIONS:
Real Gross Domestic Product
Inflation Rate
30-Year Fixed Interest Rate
Oil Price: barrel
Natural Gas Price: mmbtu
2014
2015
2016
1.4%
2.0%
4.30%
$100
$4.50
2.9%
2.3%
4.46%
$96 ($85-$120)
$4.70($4.20$4.80)
2.9%
2.2%
4.50%
$92 (85-$120
$4.80($4.10$5.20)
STATE PROJECTIONS:
Non-Farm Employment (000s):
Absolute Growth Rate
Percent Growth Rate: Employment
1,971.4
1.1%
20,400
2,005.5
1.7%
34,100
2,038.1
1.6%
32,600
MSA
PROJECTIONS:
EMPLOYMENT (000s)
Alexandria
Absolute Change
Percent Growth Rate
Baton Rouge
Absolute Change
Percent Growth Rate
Houma
Absolute Change
Percent Growth Rate
Lafayette*
Absolute Change
Percent Growth Rate
Lake Charles
Absolute Change
Percent Growth Rate
Monroe
62.5
-0.2
-0.3%
394.2
9.3
2.4%
101.6
2.1
2.1%
162.8
3.3
2.1%
95.5
3.2
3.5%
78.9
62.8
0.3
0.5%
404.1
9.9
2.5%
103.9
2.3
2.3%
165.7
2.9
1.8%
101.6
5.5
6.3%
79.4
63.2
0.4
0.6%
413.8
9.7
2.4%
106.1
2.2
2.1%
168.5
2.8
1.7%
107.5
6.5
5.8%
79.9
Absolute Change
0.9
0.5
Percent Growth Rate
1.2%
0.6%
New Orleans*
553.1
561.4
Absolute Change
7.5
8.3
Percent Growth Rate
1.4%
1.5%
Shreveport-Bossier*
171.5
172.8
Absolute Change
0.3
1.3
Percent Growth Rate
0.2%
0.8%
RURAL EMPLOYMENT
351.1
353.8
Absolute Change
-4.2
0.7
Percent Growth Rate
-1.2%
0.2%
Source: LSU forecasting team. *Size of this MSA increases in 2015
vi
0.5
0.6%
570.4
9.0
1.6%
174.2
1.4
0.8%
354.5
0.7
0.2%
TABLE OF CONTENTS
Page
ACKNOWLEDGEMENTS…….................................................................................ii
EXECUTIVE SUMMARY………………………………………………………….iii
OUTLOOK FOR 2015-16; UNDERLYING ASSUMPTIONS…………………….. 1
BRIEF HISTORY OF THE LOUISIANA ECONOMY……………..……….…… 14
THE OUTLOOK FOR THE METROPOLITAN STATISTICAL AREAS…….… 27
The New Orleans MSA: Construction+Healthcare+High Tech+ St. James.. 30
Baton Rouge: An Epic Chemical Expansion = IBM……………………….. 41
Shreveport/Bossier: Bending the Curve toward Growth............................... .52
Lafayette: Exploration Service Firms, Helicopters……………………… …62
Houma: Both Deep & Shallow Are Back…………….................................. 69
Lake Charles: How Many Synonyms for the Word ―Huge‖?....................... 76
Monroe: Welcome to Century Link City…………………………………... 89
Alexandria: What Will Happen With Cleco?................................................ 94
THE OUTLOOK FOR THE RURAL PARISHES: 2015-16………………..…...100
THE OUTLOOK FOR THE STATE 2015-16……………………………….…....103
vii
OUTLOOK FOR 2015-2016:
UNDERLYING ASSUMPTIONS
Louisiana is an unusual state in many respects. Because of its relatively low
concentration of employment in the durable goods industry (4.6% employment versus
6.4% nationally) Louisiana tends to (1) get hammered less by national recessions than
other states and (2) respond less vigorously to national recoveries than its sister states.
The state is often further buttressed from the harm of a national downturn by its huge
energy sector. Louisiana is the nation’s #2 producer of oil and natural gas (if production
from the federal waters in the Gulf is included), has the nation’s 2nd largest concentration
of refinery capacity, and has enough miles of pipelines under it to circle the globe 4 ½
times. That same huge concentration of energy firms can also send the state into a steep
downturn (when other states are prospering) if oil and natural gas prices fall significantly.
All these factors must be considered when generating forecasts for 2015-16.
The National Economy - No Recession: Hopefully, Levy Is Wrong
While Louisiana is somewhat protected from the vagaries of the national
economy, it is certainly not immune from it. The state is influenced by whether the
nation is enjoying robust versus tepid growth or recessionary conditions. The consensus
of the forecasting community seems to be that there is no national recession on the
immediate horizon, but growth will be only moderate.
All Jobs Have Been Recovered
There are two pictures that illustrate the unspectacular nature of the recovery from
the Great recession. Figure 1 tracks the change in monthly employment in the U.S. from
the beginning of the recession in 2008 through July 2014. The decline in employment
during the recession is striking---a loss of almost 8.7 million jobs (-6.1%).
The rate of job recovery has mirrored the sharp decline with an equally sharp
recovery. Job growth post-recession has been more muted, averaging about 168,000 a
month. In July 2014 the job growth number was 209,000 and the unemployment rate had
dropped to 6.2% from a high of near 10% at the height of the Great Recession. This
notable decline in the unemployment rate cannot totally be traced to an increase in jobs; a
significant part of the decline can be attributed to a decline in the labor force.
The Brookings Institute, a think-tank in Washington D.C., estimated that at these
employment growth rates it would take until mid-2014 to recover all the jobs lost during
the recession. That turned out to be an excellent forecast as seen in Figure 2 which shows
the employment recovery rate from the five recessions since 1980. Full recovery from
the Great Recession finally occurred in May 2014. Figure 2 also reveals that this has
been the weakest recovery by far of the five recessions documented. Indeed, Brookings
estimates that at a growth rate of 180,000 jobs a month it will take the economy nine
years to reach pre-recession employment levels adjusted for inflation.
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Economic Outlook Page 1
Fig. 1: Monthly Change in US Employment
600
400
July 2014:
209,000
Ur = 6.2%
1/08 to 12/09:
-8,678,000 Jobs
(-6.1% )
Thousands
200
0
-200
Recovery
Average:
2010 to present
168,000
-400
-600
-800
-1,000
2008
2009
2010
2011
2012
2013
2014
Source: Bureau of Labor Statistics
RGDP Forecasts
In Figures 1 and 2, we have illustrated the past employment history of this weak
recovery. What are the prospects as we look ahead to 2015-16? Generally, forecasters
see little break in recent trends. As seen in the top line of our Executive Summary Table
our forecasts are based on RGDP growing by 2.9% a year over the next two years.
This view of a modest outlook is mirrored for at least the rest of 2014 and all of
2015 by the Economics Group at Wells Fargo Securities and Consensus Forecasts –
USA. Forecasts of RGDP by quarter over 2014-II to 2015-IV by these two groups are
shown in Table 1. We have rarely observed this much uniformity in forecasts across these
two groups. Both are essentially projecting 3% growth over the next six quarters. The
really good news is that neither group is forecasting a recession near term.
Readers should be aware that there is at least one contrarian view to Wells Fargo
and Consensus. David Levy writes the Levy forecast, a newsletter his family has
produced since 1949. Levy states the U.S. will fall into a recession in 2015, triggered by
a severe downturn among the country’s key trading partners. Perhaps one could just
ignore his projection as extreme but for the Levy family tradition of hitting on forecasts
against the crowd. His grandfather Jerome called the Great Recession in 1929. His
father Jay said just after WWII the economy would boom when others were projecting a
depression. His uncle Leon Levy called the dotcom crash in 1999 a few months before
that event occurred. Hopefully, Levy will be wrong, because, if he is right, all of the
projections about oil prices and investment plans in Louisiana will be off the mark.
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Economic Outlook Page 2
Figure 2
Table 1
Real Gross Domestic Product Projections by Quarter
Quarter
Wells Fargo**
Consensus***
*
2014-I
-2.1%
-2.1%
2014-II*
4.2
4.2
2014-III
1.7
3.0
2014-IV
3.0
3.1
2015-I
2.9
3.0
2015-II
3.1
3.0
2015-III
3.0
3.0
2015-IV
3.0
3.0
* Actual. **The Economics Group, Wells Fargo Securities, Monthly Outlook, August 6,
2014. ***Phillip R. Hubbard, Consensus Forecasts – USA, August 11, 2014.
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Economic Outlook Page 3
The Oil Market: Shale, the Gulf, and Mexico
Louisiana is the nation’s #2 producer of oil and its #2 producer of natural gas (if
one includes federal offshore Gulf of Mexico (GOM), heavily supported via Louisiana
ports). This state has the nation’s second largest refining capacity and there are enough
miles of pipelines running under it to circle the globe 4 ½ times. Clearly, what happens
in the energy markets will keenly impact this economy.
Figure 3 tracks movements in the price of oil from 1980 through our forecast
period of 2015-16. Our state forecasts are based on a slight decline in the price of oil
from $100 a barrel in 2014 to $92 a barrel in 2016. Our range around this point
forecast is quite wide---from a low of $85 to a high of $120. This wide range is
necessary because about two-thirds of the oil reserves in the world are held by NOCs--nationally owned oil companies. That means politics, rather than the profit motive, can
often play into decisions about production, investments in fields, and whether or not to
use private exploration firms to seek oil within their borders. For example, when Chavez
took control of Venezuela’s oil markets, that country’s production dropped from about
3.6 million barrels per day (mmbd) to 2.5 mmbd today. It was a sudden boost in
production by the Saudis in the early 1980s that caused a collapse in oil prices. With
NOCs one just never knows what may happen next.
Fig. 3: Oil Prices
140
120
Price per Barrel
100
Average
Low
High
80
2014
$100
2015 2016
$95
$90
$85
$85
$120 $120
60
40
20
0
1980
1985
1990
1995
POA
2000
POAL
2005
2010
2015
POAH
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Economic Outlook Page 4
U.S. Shale Plays
Our forecast of gradually declining oil prices is in keeping with the oil futures
market, which also presumes a gradual decline. It is the surging supply of oil from shale--primarily in the U.S.---that is largely behind this projected decline.
Below we repeat Map 1 from last year’s LEO that shows the various oil and
natural gas shale plays across the country. What is remarkable is that it was less than a
decade ago that meaningful amounts of petroleum products originated in only about five
states. Today, there are 18-20 states where significant amounts of oil and gas are being
lifted. This year, the Bakken Play in North Dakota, which was generating only 10,000
barrels per day (b/d) in 2003, is now producing 1.1 million b/d---a 110 fold increase--and output there continues to rise.
Map 1
A huge surge in production is occurring in Texas in the Eagle Ford Play in the
southern section of the state and in the Permian Basin in West Texas. Exploration
companies are especially excited about the Wolfcamp Play in West Texas. The location
of this play is shown in Map 2. It is estimated that the Wolfcamp contains 50 billion
barrels of oil and gas equivalent (boe) reserves. By contrast, the burgeoning Bakken Play
is estimated to hold 13 billion boe. The Eagle Ford shale is about 300 feet thick. The
Wolfcamp is 3,500-4,500 feet thick. It is thought to be second in size only to the Ghawar
Field in Saudi Arabia.
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Economic Outlook Page 5
Map 2
The Wolfcamp Shale Play
One of the more dramatic results of the oil shale production in recent years is
shown in Table 2. In just the six years between 2008 and 2013, U.S. imports of crude
have dropped from 66% of U.S. consumption to 47%---a decline of 2.2 million b/d. The
key to this remarkable decline has been the 70% increase in domestic production of crude
oil.
Table 2
U.S. Production & Imports of Crude Oil: 2008 v. 2013
2013
Millions of Barrels Per Day
U.S Production
8.5 mmb/d
U.S. Imports
7.6 mmb/d (47%)
2008
U.S Production
5.0 mmb/d
U.S. Imports
9.8 mmb/d (66%)
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Economic Outlook Page 6
The Tuscaloosa Marine Shale
Louisiana has its own large shale play---the Tuscaloosa Marine Shale (TMS).
As seen in Map 3, this play runs across south-central Louisiana from just above Baton
Rouge to just above Alexandria. A smaller play---the Lower Smackover is located on the
Arkansas border near Monroe, but it has been very slow to develop.
Map 3
The Tuscaloosa Marine Shale
A 1997 LSU study estimated that this play contained 7 billion barrels of oil, so the
natural question is why Louisiana is not experiencing a ―Bakken Boom‖ here? After all,
there is an abundant water supply, there is plenty of pipeline infrastructure in place, it is
located in close proximity to the refineries, and Louisiana is an oil-friendly environment.
There are two broad answers that question. First, the rock in every shale play is
slightly different. That means a fracking technique used in the Bakken Play may not
work in in the TMS. Indeed the rock in the Bakken is fairly solid, so that when it is
______________________________________________________________________________________
Economic Outlook Page 7
fracked the water, sand and chemicals pumped down the drill stem are able to keep the
cracks in the rock open to release the oil.
Unfortunately, the TMS shale is very clayey and mushy. When the frack takes
place the fissures tend to close right back up. Goodrich Resources claims to have
―cracked the code‖ on how to manage the TMS shale and is boosting its rig count in the
play, spending $300 million in 2014 to drill 32 wells.
A second problem hindering development of the TMS is the cost to drill a well.
The plat is relatively deep, especially in the Louisiana portion, and its specialized
fracking techniques are more expensive as well. Hence, exploration companies have
favored shallower, thick-rock shales in North Dakota, Texas, and Pennsylvania. Table 3
illustrates the breakeven oil price across different shale plays as estimated by Rodgers Oil
and Gas Consulting. It will take some major improvements in efficiencies in the TMS to
keep it competitive for drilling activity if our declining oil price forecast holds true.
Table 3
Breakeven Oil Prices by Play
Shale Play
Breakeven Price
Eagle Ford (TX)
$49
Bakken (ND)
$50
Granite Wash (OK)
$57
Niobrara (CO)
$66
Tuscaloosa (MS)
$69
Tuscaloosa (LA)
$92
Source: Rodgers Oil & Gas Consulting
A Surging GOM + a Boost from Mexico?
In addition to the shales plays there is growing excitement about future prospects
in the Gulf of Mexico (GOM). This region has some major positives for exploration
companies which we mentioned in last year’s LEO. The GOM straddles the world’s
largest consumer. There is a vast network of pipelines already in place, and the cost of
taxes and royalties are among the lowest in the world. There is little chance of the U.S.
nationalizing the industry (as Argentina recently did to a Spanish exploration company).
But of special importance is the sheer quantity of oil that can be produced from a single
well. As a comparison, a typical well in the Bakken Play will average 1,000 b/d; one
Chevron well in the company’s St. Malo Field in the GOM produces 13,000 b/d. GOM
wells tend to be real gushers.
The result: After declining to only 11 rigs operating in the GOM’s deep waters, a
healthy rebound post-BP-spill has the count up to about 40 in 2014. Penn Energy
projects this figure will jump to 60 by 2016. That is great news for the offshore vessel
industry---such as Edison Chouest and Harvey Gulf---located along Louisiana’s coast.
Oilfield service firms in the Houma, Lafayette, New Orleans and other coastal areas are
expanding in anticipation of this swelling tide of new business.
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Economic Outlook Page 8
In the past year, a new factor has been added to an already rosy picture for the
GOM. In December 2013, Pacto por Mexico was declared constitutional. This ended
the national monopoly on oil and gas exploration and development that has existed in that
country for the past 75 years. The secondary laws and regulations still have to be worked
out but it is beginning to look like these new regulations will involve:





Preserving state ownership of reserves in place, but private ownership after
extraction;
Having 4 possible contracting regimes: (1) pure service contracts, (2) productionsharing, (3) profit-sharing, and (4) licenses;
Participating firms not being required to partner with PEMEX;
Having a ―Zero Round‖ where PEMEX gets to choose what it wants first, but it
must demonstrate technical, financial, and operational ability to develop a field;
Possibly having a 25% national content requirement for exploration and
production---though there is a great concern whether Mexico could generate a
sufficient number of providers.
Mexico is targeting the middle of June 2015 for receiving the first bids. This
could open up huge areas of the GOM for exploration where PEMEX presently lacks the
technical skills to drill and produce. This could be another boon for service firms and
vessel owners that operate in the GOM.
There are two more regions in the GOM that have been off limits to drilling but
are very close to being open to exploration. As background, every country has an
Exclusive Economic Zone that gives it the right to drill in waters off its shores up to 200
miles out from its shores. If mineral deposits are there this zone extends 350 miles out
under the Law of the Seas Treaty. As seen in Map 4, this has presented a problem for the
U.S. and Mexico. There are two ―donut holes‖ in the GOM where the 200 mile limit
overlaps for these two countries. They are called the ―Western Gap‖ and the ―Eastern
Gap‖.
Recently a treaty was penned between the two countries called the TransBoundary Hydrocarbons Agreement. This agreement was signed into law by President
Obama in December 2013. Under the agreement, U.S. companies and PEMEX will be
able to voluntarily enter into agreements to jointly develop those reservoirs. In the event
that consensus cannot be reached, the Trans-Boundary Agreement establishes the process
through which US companies and PEMEX can individually develop the resources on
each side of the border while protecting each nation’s interests and resources. Another
rich area for exploration in the GOM has been opened up. The Bureau of Ocean Energy
Management (BOEM) estimates the Western Gap alone contains 172 million barrels of
oil and 304 billion cubic feet (bcf) of natural gas.
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Economic Outlook Page 9
Map 4
Trans-Boundary Hydrocarbons Agreement Areas
Natural Gas: Three Massive Bets
The excitement along and below I-10 in Louisiana is palpable. Connie Fabre,
Executive Director of the Greater Baton Rouge Industrial Alliance (GBRIA), has
tabulated the number of industrial announcements recently. In a really good year in the
past, we would have reported possibly $5 billion in announcements. GBRIA’s latest list
contains a remarkable $103.8 billion in announcements.
These announcements are highly concentrated by industry and by geography.
From an industrial standpoint, over 92% of the value of announcements is in the chemical
industry. Geographically, the announcements are clustered in the Lake Charles area and
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Economic Outlook Page 10
along the Mississippi River from Baton Rouge to New Orleans. These two regions have
the three key ingredients that chemical firms covet: (1) an ample supply of natural gas,
(2) an ample supply of water (the Mississippi River, the Gulf, and the Calcasieu Ship
Channel), and (3) viable waterways for moving their bulk products by barge or ship.
Over a third of these projects are either finished or are under construction. We
estimate that about $64 billion worth of the projects are at the FEED (Front End
Engineering & Design) or permitting stage. There may be some initial ground
preparation at the sites, but nothing has gone ―vertical‖ at the site as yet.
Factors behind the Boom: Lower Natural Gas Prices
What is behind this huge industrial boom? There are basically three factors.
First, as shown in Figure 4, is the very large decline in the price of natural gas.
Chemical plants are prodigious consumers of natural gas, using the fuel either as a cleanburning boiler fuel or as a raw material (ammonia fertilizers and ethylene, for example,
are made from natural gas). For five years in the mid-2000s the price of natural gas
ranged between $6 to $9 per million btu (mmbtu). There were several months when the
price exceeded $10 per mmbtu. Beginning in 2009, the price began to plummet and has
settled in the $4-$5 range. Our forecast is for this price to stay just below $5 per mmbtu
over 2015-16. A key ingredient in a chemical firm’s production process has dropped
significantly.
Figure 4: Price of Natural Gas
9
8
Per MMBTU
7
PGA
PGL
PGH
2014
$4.50
2015 2016
$4.70 $4.80
$4.20 $4.10
$4.90 $5.20
1995
2000
6
5
4
3
2
1
1990
PGA
2005
PGAL
2010
2015
PGAH
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Economic Outlook Page 11
Factors Behind the Boom: Higher Natural Gas Prices in Europe
A second and very important factor in the industrial boom (an explanation for its
concentration in the chemical industry) is that while the price of natural gas has fallen in
the U.S., it has not fallen in Europe as seen in Figure 5. While U.S. prices hover
between $4-$5 per mmbtu, in Germany it is closer to $12. Germany---and other
countries in Europe---are huge chemical producers. With this natural gas price
differential, European chemical firms simply cannot compete in the world chemical
market with U.S. producers. The prospect of eating into Europe’s chemical market share
has fueled much of the industrial expansion in Louisiana.
Figure 5
Factors Behind the Boom: Oil/Natural Gas Price Differential
A third factor behind this industrial boom has to do with the price differential
between oil and natural gas. When oil and natural gas prices differ by a factor of about
seven, they are equal in btu content. So, if the price of natural gas is $4 per mmbtu and
the price of oil is $28 per barrel, they are about equal in btu content. At this time the
price of oil is near $100 a barrel. The differential is so wide that it is creating at least two
key incentives. One is to switch vehicles and vessels from running on gasoline/diesel
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Economic Outlook Page 12
to operating with compressed natural gas (CNG) or liquefied natural gas (LNG). In
fact, almost all new garbage trucks are being manufactured to run on natural gas, as are
many city buses, Fedex trucks, and some offshore supply vessels. The second incentive
has been to propose building gas-to-liquids (GTL) plants. These plants would be built
to convert natural gas into gasoline. One of the largest of the announcements in
Louisiana was made by Sasol in Lake Charles to construct a $12-$14 billion GTL plant.
G2X Energy has proposed a $1.5 billion GTL plant and Southern California Telephone &
Energy has proposed building a $2.4 billion GTL facility.
Three Massive Bets
It should be clear to the reader that there are three massive bets fueling this
industrial boom. The first is the bet that natural gas prices will remain low. As seen
back in Figure 4, we believe this is a very good bet. There is now an ocean of natural gas
in this country that should keep a lid on prices into the immediate future. Prolific dry
plays like the Haynesville Shale in northwest Louisiana and the Fayetteville Shale in
Arkansas are almost lying fallow now, just waiting for a slight upward bump in natural
gas prices.
The second major bet is that European natural gas prices will remain relatively
high. This is a little more risky bet. There are plenty of shale plays under Europe but the
green community has managed to pass a EU-wide ban on fracking to harvest those plays.
Even if the ban is lifted, it would take time to ―crack the code‖ on how to frack the EU’s
plays and to build the pipeline infrastructure to get the new gas to market. Also, mineral
rights in the EU are generally not owned by the landowner, but rather by the
governments, which add clumsiness to the harvesting effort. What makes this a more
risky bet is that soon, as Europe starts losing share of the world chemical market, it will
also start losing many high-wage jobs. That could be a major incentive to take a second
look at its fracking ban.
The third bet is the riskiest of them all. That is that the price differential
between oil and natural gas will remain wide. The problem is not that the price of
natural gas might go up, thus closing the gap. Because of the huge supplies of the fuel
available in the U.S., we believe natural gas prices will stay low. The trickier issue is the
price of oil. It just takes a glance back at Figure 3 to realize that oil prices can fall, and
fall quickly as it did in 2009. If fracking for oil migrates to other countries, the world
could find itself awash in oil, putting downward pressure on the oil price. In fact, Shell
backed out on its decision to invest $12.5 billion in a new GTL plant south of Baton
Rouge over concerns about this price differential. Sasol is not planning to break ground
on its GTL plant until 18-24 months after the decision is made to proceed on its ethylene
plant. Will Sasol, G2X, and Southern California Telephone & Energy follow through on
their plans to build GTL plants? The key is the oil-natural gas price differential.
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A BRIEF HISTORY OF THE LOUISIANA ECONOMY
We insert at this point in the LEO a brief history of the Louisiana economy so
that readers can understand what forces have driven the economy over the past four
decades. It also provides us with the opportunity to illustrate the profound impact that
Hurricanes Katrina and Rita had on the state and the way the state has coped with the
Great Recession. For a good visual reference, Figure 6 tracks non-farm employment in
Louisiana over 1975-2014. The four downturns Louisiana has experienced are illustrated
by the gray bars in the figure.
From Heady Boom to the First Big Recession
The years from 1975-81 were heady ones for the Louisiana economy. The price
of crude oil had risen from only $7.09 a barrel in 1975 to a whopping $37.48 at one point
in early 1981 (about $93.15 in 2011 dollars). The southern part of the state especially
became like a gold mining town in the gold rush days. Employment in the oil and gas
extraction sector rocketed up from about 50,000 in 1975 to just over 102,000 at one point
in 1981.
As seen in Figure 6, overall non-farm employment boomed as well, rising at an
average rate of 4.1 percent a year over 1975-81. In 1978, employment jumped a
remarkable 7.2 percent in one year.
Then from 1982-87, Louisiana went through a terrible recessionary period, still
the worst in its recorded history. Nearly 148,000 jobs vanished within the state, about
9% of the workforce. To get a feel for how bad it was compare that number to the 6.1%
drop in U.S. employment during the Great Recession. Plunging energy prices cut the
extraction workforce in half, and a huge run up in the value of the dollar virtually
destroyed the export markets for our chemicals, prompting that industry to lay off a third
of its workers. The negative multiplier effects of these firings added to the misery.
Climbing Out of the Abyss: 13 Years of Growth
As seen in Figure 6, the state in 1988 began the long climb out of the abyss into
which it had fallen in the previous six years. The primary driver behind this recovery
was the chemical industry. In 1985, a complete reversal in the trend of the exchange
value of the dollar occurred. Now foreigners were observing U.S. chemical prices
declining dramatically in terms of their own currencies. The result was a very strong
resurgence in the demand for Louisiana chemicals. Chemical firms began large-scale
capital expansion projects, augmenting employment not only in chemicals but also in the
industrial construction sector.
Fortunately, growth was occurring in other sectors as well, helping to diversify
the economy and making it less vulnerable to negative trends in any one industry. The
transportation equipment industry, once heavily tied to oil and gas related activities,
diversified into defense contracting and more general shipbuilding. The textile industry
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Economic Outlook Page 14
began a major expansion, led by Fruit-of-the-Loom, a firm which expanded so much that
it became the largest manufacturing firm in the state, as measured by employment.
Healthcare also enjoyed a major expansion during this period due to a huge
injection of federal Medicaid monies into the state. Medicaid dollars rose from under one
billion dollars in 1989 to over three billion by 1993. By 1993, the state had finally
recovered all the jobs lost during the terrible recession of 1982-87 and began to set new
employment records.
Fig. 6: Louisiana Non-Farm Employment: 1975-2014
2,000
2001-02:
-22,100 Jobs
(-1.2% )
1,900
X
Thousands
1,800
2005-06:
Katrina-Rita
-64,300 jobs
(-3.4% )
1,700
1,600
1,500
1,400
1982-87:
-147,900 jobs
(-9.0% )
1,300
1,200
75
80
85
Jan. 2013
New Record
(1 of only 14 States)
2014:
+20,400 jobs
(1.0% )
90
95
00
2009-10:
-52,800 jobs
(-2.8% )
05
10
Note in Figure 6 that the 5 years from 1994 to 1998 were especially good ones for
the state. Employment grew at rates of 3.8, 2.9, 2.1, 2.2, and 2.1 percent, respectively.
These were rates in excess of the nation’s performance.
Several industries contributed to this nice spurt of very strong growth. After 12
years of employment declines, the oil and gas extraction sector began a solid recovery,
which pulled along all those industries that sell products and services to it.
In 1993, there was no casino industry in Louisiana. Pre-Katrina and Rita, about
19,713 jobs had been created in Louisiana’s 15 riverboat casinos, its four racinos, and its
sole land-based casino. And this employment number does not include the people
working at the three Indian casinos in the state. Changes in federal policies governing the
harvest of timber on publicly owned lands in the Pacific Northwest drove several new
lumber companies to Louisiana during this period.
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These sectors provided an extraordinary boost to an economy which was, in
general, doing well across several sectors. The result was unusually expansive
employment in those five years.
The ‟99-„00 Slowdown
It is apparent from Figure 6 that 1999 was anything but a banner year for the state.
In the early part of 1998 the price of oil began a slide that did not end until it moved
below $10 a barrel---a level not seen since the horrendous recessionary year of 1986. For
a while the extraction industry held on, but then the bloodletting began. Blue-collar jobs
were eliminated as the rig count dropped from 218 to 125. Then mergers and
consolidations among both exploration and services firms meant white-collar layoffs or
relocations to Houston. Between 98-III and 99-III, 13,100 jobs were lost in Louisiana’s
extraction industry. Ancillary firms, such as fabricators, machine shops, and ship
builders, were pulled down along with the industry.
As we will discover later in our report on the metropolitan areas, the Lafayette
and Houma MSAs were especially impacted by these layoffs. Despite these blows,
Louisiana’s employment actually grew marginally in 1999, though by only 0.4 percent.
In the latter part of 1999 and early 2000, both oil and natural gas prices began an
unexpected and remarkable move upward. By 2000-IV, oil prices had jumped to $32.57
a barrel and natural gas averaged $5.71 per mcf. At one point in the winter of 2001,
natural gas was priced at over $10.50 per mmbtu at the Henry Hub.
The extraction industry began its move back into the oil patch, slowly at first, then
picking up momentum. The rig count rose back through its previous peak of 218 and
attained 232 at one point. This nice stimulus from the extraction industry boosted the
state’s employment back up by 1.2% (see Figure 6). This was still not very stellar
growth, especially when compared to the 1994-98 period.
2001-02: The Second Recession in Three Decades
It is clear from the picture in Figure 6 that, like the immediate post-911 national
economy, the years 2001 and 2002 were not great ones for Louisiana. Employment fell
by 2,300 jobs in 2001 and by 19,800 jobs in 2002. That is a total of 22,100 jobs over
the 2-year period or a decline of 1.2%.
However, there was some good news in the numbers. Louisiana did lose 1.2
percent of its jobs, but apparently most states endured even worse job losses. U.S.
payroll employment fell by 2,598,000 jobs between March 2001 and June 2003. That
represents a 2.0% decline---higher than the Louisiana loss.
Why did the national recession hit Louisiana a bit more lightly than other states?
Two factors were at work. First, when the nation enters a recession the first industry to
get hit is the durable goods industry. After all, people have to buy food and utilities, but
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Economic Outlook Page 16
they can postpone buying appliances, cars, homes, boats, etc. In the U.S., 6.4 percent of
employment is in durable goods industries. In Louisiana that figure is only 4.6 percent,
and much of that employment is in national defense shipbuilding or manufacturing
platforms and rigs for the extraction industry---areas pretty immune from national
recessions. Louisiana did not have a major durable goods manufacturing sector that was
laying people off.
As an aside, durable goods employment is 9.2, 9.0, and 7.6 percent of jobs in
Mississippi, Alabama, and Arkansas, respectively. Employment cuts are typically much
deeper and longer in these states as compared to Louisiana.
A second aid to Louisiana was the fact that up until the very end of 2001, the
extraction sector was doing quite well. That sector also enjoyed a mild recovery of sorts
in 2003. This is a safety net that was enjoyed by only a couple of other states, like Texas
and Alaska.
2002: The Toughest Year of the Recession
As mentioned earlier, 2002 was the toughest year of the post-911 recession in
Louisiana. Several events combined to make 2002 a pretty ugly one for the state. They
are as follows:

When oil prices fell to the $18 a barrel range in late 2001 and early 2002, the
extraction industry pulled back some, shedding about 1,000 workers between June
2001 and June 2002.

High natural gas prices, weak demand, and weak chemical prices hammered the
chemical sector.

Avaya Communications, Pennzoil Refinery, and Boeing Aircraft all shut down in
Shreveport, laying off over 1,300 workers. Beaird Industries and Frymasters in the
same city also engaged in significant layoffs.

Fruit-of-the-Loom shuttered its St. Martin Parish plant at a cost of 1,300 jobs.

The absence of expansion activity in the state’s huge chemical sector hurt industrial
construction work. Construction employment fell by 6,200 jobs in 2002.
2003 to Mid-2005: Slow, Plodding Recovery
Note back in Figure 6 that the Louisiana economy began to grow again, though at
a very modest rate. Non-farm employment rose only 0.5 percent in 2003. That was
much better than some neighboring states as seen in Table 4. Mississippi, Alabama, and
Arkansas all experienced employment declines one year longer than Louisiana, and their
overall decline was greater, except for Arkansas, whose decline matched that of
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Economic Outlook Page 17
Louisiana. Again, this fits the pattern of states that have a larger durable goods
dependency than Louisiana.
Table 4
Employment Declines in Louisiana, Mississippi, Alabama & Arkansas
During the Post-911 Recession
State
Louisiana
Mississippi
Alabama
Arkansas
Years of Decline
2001, 2002
2001, 2002, 2003
2001, 2002, 2003
2001, 2002, 2003
% Decline in Employment
1.2%
3.2%
2.9%
1.2%
Still, Louisiana’s recovery from the recessionary period was plodding at best. Not
only did employment rise only 0.5 percent in 2003, the state grew only 0.7 percent in
2004 and by August 2005 Louisiana’s non-farm employment was rising at only a 1.9
percent rate. What was the problem?
By far the biggest culprit was the chemical industry. This sector had lost 5,900
jobs since peaking in 1998, and much of that decline (4,500 jobs) had occurred since
2001. The chemical industry was hammered by high natural gas prices. Retrenching in
this sector created problems in industrial construction and fabricated metal manufacturing
as well.
A second culprit was the extraction sector. In an almost remarkable reversal of
historical precedence, Louisiana’s extraction sector experienced almost no bump from
higher oil and natural gas prices---mainly due to a drag on the industry created by some
high-profile legacy lawsuits. Weakness in extraction also had a negative impact on the
fabricated metals sector and shipbuilding.
With a pummeled chemical industry and a moribund extraction sector it was hard
for the feeder sectors---such as trade, services, and finance---to muster much growth.
The result was weak employment growth rates over 2003-05.
Into the Abyss: Katrina and Rita
Unquestionably the most dramatic economic events in Louisiana’s economic
history occurred in August and September of 2005. Two highly destructive hurricanes hit
Louisiana. Hurricane Katrina tracked right over Plaquemines and St. Bernard Parishes
and on up the Louisiana-Mississippi border on August 29, 2005. Katrina was a category
4 hurricane when it made landfall, with maximum sustained winds of 143 mph and gusts
up to 165 mph. Hurricane Rita made landfall about a month later on September 24,
2005, coming in right on the Louisiana-Texas border. Rita was a category 3 hurricane
when it made landfall, with maximum sustained winds of 120 mph.
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Economic Outlook Page 18
While the Lake Charles MSA sustained significant damage from Rita, the greatest
destructive force by far was leveled on the New Orleans MSA. When Katrina hit, the
levee system in New Orleans failed in several areas. The entire ninth ward on the east
side of New Orleans was flooded. The 17th Street Canal was breeched sending flood
waters into sections of old Metairie and the Lakefront.
Before these waters were pumped out, most of the impacted homes had sat in four
to ten feet of water for nine days to two weeks. Just as the Ninth Ward was pumped dry,
Hurricane Rita came along and caused a water surge that re-flooded that area. In
addition, the very low-lying parishes of Plaquemines and St. Bernard were swamped by
water surges, especially by Katrina. (For an interesting visual track of the collapse of the
levees and subsequent flooding see http://www.nola.com/katrina/graphics/flashflood.swf).
A combination of high winds and water surges made these two storms the most
destructive natural disasters in the modern history of the United States. Consider the
comparative data in Table 5 below which does not even include Rita:
Table 5
Top Six Natural Disasters in the U.S. Since 1980
Natural Disaster
Costs
Katrina
$200 billion +
1988 Drought/Heat
$61.6 billion
1980 Drought/Heat
$48.4 billion
Hurricane Andrew
$27 billion
1993 Midwest Flood
$26.7 billion
Hurricane Charley
$14 billion
Source: National Oceanographic and Atmospheric Administration
Impacts on Housing
Katrina and Rita’s impact on housing was particularly severe as seen in Table 6.
Numbers in the first two rows (destroyed/major damage) are homes rendered
uninhabitable. The National Association of Home Builders has estimated that seven
times more homes were rendered uninhabitable by Katrina alone than any other natural
disaster in U.S. history. Note in this table that housing damage was highly concentrated
in the New Orleans MSA. Almost 60 percent of the houses damaged in the New Orleans
MSA incurred major or severe damage.
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Economic Outlook Page 19
Table 6
Impacts of Katrina and Rita on Housing in Louisiana
Impact
Statewide
New Orleans MSA
Lake Charles MSA
Minor Damage
210,512
122,446
38,427
Major Damage
98,086
79,068
6,673
Severe Damage
106,651
102,898
2,284
Total
515,249
304,440
47,384
Percent with
Major or Severe
39.7%
59.8%
18.9%
Damage
Source: FEMA, February 12, 2006.
Impact on the Offshore Oil and Gas Industry
When a hurricane like Katrina is poised to enter this region of the GOM, energy
companies begin the process of shutting down the offshore platforms and evacuating
personnel. How many platforms are evacuated depends on the path of the storm.
Figures 7 and 8 track the shut-in statistics for crude oil and natural gas produced
in the GOM. Shut-in oil and natural gas refers to output that was being produced but is
not now because of damaged platforms, pipelines or onshore receiving units. In the case
of Katrina, 95.2 percent of the crude oil and 88 percent of the natural gas production was
shut-in by August 30th. By September 9th, the shut-in rates had dropped to about 56-58
percent for oil and about 33-37 percent for natural gas. Then the improvement stabilized.
When Rita appeared, because it made landfall further to the west and more into the center
of the GOM production region, 100 percent of crude and 80 percent of natural gas was
shut-in. The last shut-in statistics released by the Minerals Management Service showed
that 12.1 percent of oil and 9.3 percent of natural gas production was still shut-in as of
June 6, 2006.
In the case of both of these storms, return to total production was steady but not
very swift. In fact, the shut-in rate for Katrina stabilized almost twice as high as was the
case for Hurricane Ivan the previous year. For example, crude oil production after Ivan
initially stabilized at about 480,000 bd while the comparable figure for Katrina was closer
to 850,000 bd.
Why wasn’t crude and natural gas production immediately restored to their prehurricane levels? Think of this production occurring in three primary zones---(1)
offshore platforms, (2) underwater pipelines, and (2) onshore receiving units. Each of
these suffered damages that needed repair before production could be restarted.
Zone 1: Offshore platforms. One reason that production was not immediately
restored was because of damage to offshore platforms. As seen in Table 7, Hurricanes
Katrina and Rita---because they were stronger storms that hit more in the heart of the
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Economic Outlook Page 20
GOM production region---caused far more damage to these platforms than did Ivan
which hit farther east.
Figure 7
Shut-in Oil Production in the Gulf of Mexico
Shut-in Oil (bbl/d)
12/06/05
12/09/05
12/16/05
01/11/06
12/06/05
12/09/05
12/16/05
01/11/06
12/01/05
11/28/05
11/21/05
11/16/05
11/10/05
11/04/05
11/01/05
10/27/05
10/24/05
10/19/05
10/14/05
10/11/05
10/05/05
09/30/05
09/27/05
09/23/05
09/19/05
09/14/05
08/30/05
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Source: Minerals Management Service
Figure 8
Shut-In Natural Gas Production in the Gulf of Mexico
Shut-in Gas (mmcf/d)*
12/01/05
11/28/05
11/21/05
11/16/05
11/10/05
11/04/05
11/01/05
10/27/05
10/24/05
10/19/05
10/14/05
10/11/05
10/05/05
09/30/05
09/27/05
09/23/05
09/19/05
09/14/05
08/30/05
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Source: Minerals Management Service
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Economic Outlook Page 21
Table 7
Impact on Offshore Platforms of
Hurricanes Ivan, Katrina, and Rita
Impact
Ivan
Katrina
Rita
Destroyed
7
46
69
Damaged
20
20
32
Source: Office of Electricity Delivery and Energy Reliability, U.S. Department of
Energy, www.doe.gov, October 7, 2005, p.2.
Of the platforms destroyed by Katrina and Rita, most were older platforms that
were built under pre-1988 upgraded design standards, and were located on the ―shelf‖
(shallow waters), where the wells were fairly depleted and producing little product. Still,
there were a number of the larger, deepwater platforms that suffered major damages. For
example, as a result of Katrina there were four deepwater platforms that accounted for
about 10 percent of offshore crude oil production that were severely damaged. Among
these were Mars, Ursa, Mansa, and West 143---all owned by Shell Oil Company. Mars
was restored to service in May 2006. Among the casualties of Rita was Chevron’s
Typhoon TLP (tension leg platform) which was turned upside down by the storm.
Zone 2: Underwater pipelines. Damage to underwater pipelines was one of the
greatest concerns to the energy sector because checking and repairing these pipelines
requires some of the scarcest resources in the oil patch---divers, boats, and power.
Underwater mudslides caused by Ivan wiped out 102 pipeline systems. Katrina and Rita
knocked out 655 more, a total of 20,000 miles of pipelines.
Zone 3: The onshore receiving units. Once the crude oil and natural gas reaches
shore, these fuels are received by refineries, gas processing plants and onshore pipelines.
The first two sets were the most problematic. Katrina caused the closure of eight
refineries. Within two weeks after the storm passed, four of these had power restored
and were refining crude oil. Four others not only lost power but were also damaged and
were flooded. Three were in Louisiana: (1) the 350,000 bd ConocoPhillips Refinery; (2)
the 183,000 bd ExxonMobil Refinery, and the 122,000 bd Murphy Oil Refinery. These
three units were located in the heavily flooded areas of St. Bernard and Plaquemines
Parishes. All of the refineries were re-opened by summer 2006.
Rita closed three other refineries in the Lake Charles MSA: (1) Citgo (324,000
bd); ConocoPhillips (239,400 bd), and (3) Calcasieu (30,000 bd). These three units had
mostly minor wind damage and power loss but fortunately, no flooding. They were all
three back up by November 2005.
What received little attention from the press was the damage to gas processing
plants in the region. Natural gas produced offshore tends to be high in hydrogen sulfide
and water. The processing plants refine these impurities out. Three were located near the
mouth of the Mississippi River and were severely damaged by both wind and flood.
Dynergy’s plant in Venice was so badly damaged that pipelines were rerouted from it to
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Economic Outlook Page 22
other processing plants. Together these three plants processed about 2.8 bcfd of natural
gas. Rita added another six plants to these three, though these six were not as badly
damaged as the Katrina victims. All of these plants are back in operation.
Impact on Non-Farm Employment
One is also struck by the impact of these two storms on non-farm employment in
the state. Back in Figure 6 we graphed the annual average employment levels in the
state. Because these storms hit in the latter part of 2005, their influence does not fully
show up until the 2006 numbers are shown. Employment experienced a total drop of 3.4
percent. Using these annual average figures, Louisiana lost 64,300 jobs as a result of
these storms, almost half of the 147,900 jobs lost during the entire 1982-87 period. The
great difference is that in the latter case, the job loss occurred over a 6-year period. The
two hurricanes caused a loss half that size to occur virtually overnight.
Even that last paragraph does not do justice to the employment blow Louisiana
endured as a result of Katrina and Rita. That is because the employment change
mentioned above was in terms of annual averages. The great Nobel Laureate in
Economics---Milton Friedman---once commented that some people do not understand
how a man six feet tall could drown crossing a river that was on the average only five feet
deep! Examining the monthly change in Louisiana’s employment reveals that the state‟s
employment fell from 1,941,100 in August 2005 to 1,776,000 in October 2005---a
huge decline of 165,100 jobs or 8.5 percent! A sharp recovery of jobs in the next 14
months helped bring the annual averages up smartly and hid just how deeply the job cut
was.
Out of the Abyss: Recovery Post-Katrina and Rita
Given the devastation meted out by Katrina and Rita the recovery of the state as a
whole from those two storms was in a sense quite remarkable. A quick glance back at
Figure 6 shows that on an annual average basis the state had recovered all but 2,000 of
the jobs lost due to Katrina and Rita by 2007.
Largely this recovery was led by a huge construction boom. Massive amounts of
recovery monies were pumped into the Louisiana economy by both the federal
government and private insurance companies. Gulf Opportunity Zone (Go-Zone)
legislation was passed by Congress to further incentivize companies to make capital
expenditures in the affected regions. Go-Zone legislation provided either (1) an upfront
50 percent depreciation provision or (2) very low interest bonds for construction. A
rough count showed over $20 billion in construction projects in the New Orleans area and
$6.5 billion in the Baton Rouge MSA---construction figures that were 8-10 times larger
than in normal years.
A second boost came to Louisiana’s oil and gas extraction sector. Very high oil
and natural gas prices pumped up the energy-dependent Lafayette and Houma MSAs. A
couple of high-profile economic development wins---Union Tank Car in Alexandria and
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Economic Outlook Page 23
Steelcase (now Ternium) in Shreveport---gave a nice positive jolt to central and
northwestern areas of the state.
Impact of the Great Recession
Back in our "Assumptions" section we spent a good bit of time describing at the
national level the impact of what has become known as the Great Recession. Recall that
this recession started in December 2007 and ended June 2009. During the recession the
US economy began to lose jobs in January 2008 and by the end of 2009 had lost
8,363,000 jobs for a decline of 6.1 percent. RGDP fell by 5.1%, the worst recessionary
decline experienced in the U.S. since the Great Depression.
The impact of this recession---much like previous ones---was much more muted
on the Louisiana economy. The data in Table 8 illustrate the impact of the recession on
both the state and its eight Metropolitan Statistical Areas (MSAs). Note that:

While the nation began losing jobs in January 2008, Louisiana did not lose its first
job until a year later. Louisiana employment actually rose 1.1 percent in 2008.

The U.S lost 6.1 percent of its jobs, while Louisiana's job loss was only 2.8
percent.

The U.S. began adding jobs (but inconsistently) in January 2010; Louisiana did
not begin to add jobs until June 2010.

Job losses across Louisiana's MSAs ranged from a low of only 1.2 percent in New
Orleans to a high of 6.2 percent in Lake Charles.
Table 8
Impact of Great Recession on Louisiana & Its Eight MSAs:
Non-Farm Employment
Area (Total Change)
State (-2.8%)
Alexandria (-5.6%)
Baton Rouge (-3.1%)
Houma (-5.0%)
Lafayette (-3.0%)
Lake Charles (-6.3%)
Monroe (-3.0%)
New Orleans (-1.2%)
Shreveport (-2.1%)
Month
1st Loss
1/09
1/09
9/08
8/08
9/08
2/09
6/08
1/09
10/08
2009 %
Change
-1.9%
-3.2%
-1.1%
-3.7%
-2.2%
-3.9%
-2.0%
-1.0%
-2.3%
2010 %
Change
-0.9%
-2.4%
-2.0%
-1.3%
-0.8%
-2.4%
-1.0%
-0.2%
+0.2%
2009
Change
-36,500
-2,100
-4,100
-3,600
-3,300
-3,700
-1,600
-5,400
-4,200
2010
Change
-16,300
-1,500
-7,200
-1,200
-1,100
-2,200
-700
-1,300
+400
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Economic Outlook Page 24
`
As in the past, Louisiana's lesser dependency on durable goods production
protected the state from a serious decline, and the state was protected even more by the
still lingering benefits of extra construction activity due to the Go Zone legislation.
Regarding the Go Zone construction effect, Figure 9 illustrates construction
employment in Louisiana over 1990-2010. Note that in the post 9-11 recession,
Louisiana's construction employment fell sharply for four straight years, and that was a
very minor national recession---lasting only 8 months.
Contrast that experience with the employment trends during the Great Recession.
Louisiana's construction sector actually grew in 2008, did not record its first job loss until
April 2009, and fell 9.5 percent---less than the previous short, shallow national recession.
Fig. 9: Louisiana Construction Employment: 1990-2012
140
Thousands
130
120
2008: Grew
2009-10:
-12,800
(-9.5% )
110
2001-04:
-12,500
(-9.7% )
100
90
1990
1995
2000
MS: -20%
AL: -30.0%
AR: -15.8%
US: -28.5%
2005
2010
Contrast that performance with what happened in the much more durable-goodsdependent Alabama. As shown in the inset in Figure 9, that state's construction
employment was hammered, dropping 30 percent (and it is still declining in 2013).
Mississippi's construction decline was 20%, Arkansas's was 15.8% (and still declining),
and the overall U.S. construction employment fell 28.5% (three times more than in
Louisiana). In no small respect, the Go Zone legislation spared Louisiana from a much
sharper decline due to the Great Recession.
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Economic Outlook Page 25
Coming Out of the Great Recession: 2011-14
Finally, we come to Louisiana's recovery year from the Great Recession. The
state's employment actually started to show positive numbers in 2010-IV and has
continued on a positive track. Louisiana has now enjoyed four straight years of growth
and actually began to set new employment records in January 2013. One of the
authors tracks the economies of ten states from Louisiana up to Arkansas across to the
Carolinas. Only one of those ten states had more people employed in the summer of
2014 than in January 2008 – Louisiana.
Several factors are behind this fine performance. As we pointed out under the
―assumptions‖ section dealing with natural gas prices, the state is enjoying an
unprecedented industrial consumption boom.
When the Louisiana Workforce
Commission released its latest state employment estimate for June 2014 it showed nonfarm employment was up 22,400 in the past year. About a fourth of that growth---5,400
jobs---was in Louisiana’s construction sector.
Exploration activity in the Gulf of Mexico is now well above pre-spill levels and
is expanding beyond, generating jobs in the exploration companies and all those firms
that provide goods and services to that sector. The Louisiana Department of Economic
Development has garnered a number of wins, bringing new industries to the state that are
not exploration or chemical-industry related. Among these are (1) the completion of the
$750 million phase I of Nucor Steel’s plant in St. James Parish, (2) Ameritas, CB&I, and
IBM in Baton Rouge, (3) Ron Pak, Integrico Composites, Computer Sciences
Corporation, and Benteler Steel in Shreveport-Bossier, (4) GE Capital, 4th Source, and
Performance Software in New Orleans, (5) CenturyLink in Monroe, (6) excellent
diversification wins in Lafayette via Bell Helicopters, CGI, Enquero, and Perficient, and
(6) two large wood pellet plants in rural Louisiana, to name a few.
As we will see in the forecast section, Louisiana is poised for a period of
exceptional growth.
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Economic Outlook Page 26
THE OUTLOOK FOR THE METROPOLITAN STATISTICAL AREAS
There are 64 parishes in Louisiana, and the U.S. Bureau of Economic Analysis
(BEA) has taken 34 and separated them into eight metropolitan statistical areas
(MSAs). These parishes are all grouped around one or more major cities in the state.
Map 5 shows the location of each and the parishes that are in each MSA. An important
change will take place in 2015 when the definitions of three MSAs will expand: (1)
Lafayette will add Acadia, Vermillion and Iberia Parishes, (2) Shreveport-Bossier will
add Webster Parish, and (3) New Orleans will add St. James Parish. Starting in 2015,
all labor data will reflect these new designations.
Map 5: Louisiana Metropolitan Statistical Areas
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Economic Outlook Page 27
Like Children in the Family Each MSA Is Different
In a family of eight children each was created from the same gene pool, yet
typically each child is also unique, with his/her own appearance, personality, and
intellectual gifts. Louisiana's eight MSAs are much like that. They are all part of the
Louisiana economy, but each one is very unique and different from the others. Each has
a different economic base. Each recovered from the Great Recession at a different pace.
Each has different obstacles to overcome going forward, and the future prospects for each
are quite different.
New Orleans---with an estimated 553,100 non-farm workers---would be the
counterpart of the oldest, largest child in the family. Though there have been some great
advances in this region since the mid-2000s, this MSA’s employment still remains nearly
12% below its Pre-Katrine/Rita peak. Situated near the mouth of the Mississippi, the
MSA’s system of ports ranks among the largest in the world in terms of tonnage moved.
It houses a huge medical complex veterans and non-veterans, and it is the home to several
universities---the largest being the University of New Orleans and Tulane University.
New Orleans proper is a tourism magnet, in some cases attracting tourists to its
substantial gaming industry anchored by the state’s only land-based casino, two other
riverboat casinos and the Churchill Downs Racetrack. A number of large refineries and
chemical firms reside within this MSA’s boundaries, and recently the region has attracted
a burgeoning tech sector.
Second in size, Baton Rouge provides jobs for about 394,200 non-farm workers.
The petro-chemical industry looms large in this MSA which the largest concentration of
chemical employment in the state, the country’s #3 largest refinery, and an unusually
high concentration of industrial construction workers to support that base. Both LSU
and Southern University are located in this MSA along with Baton Rouge Community
College, which is now larger than Southern. This is also the location of the State Capitol,
which means government employment plays a major role in this MSA. Its growing high
tech sector is anchored by the new IBM complex in downtown Baton Rouge. It is the
home of three riverboat casinos, and has a healthy film and digital gaming sector.
The third largest MSA is Shreveport-Bossier (171,500 jobs in 2014). This MSA
contains the State’s largest gaming sector with six riverboat casinos and one racetrack. A
very active port exists on the Red River in the Shreveport-Bossier area. It hosts a number
of large employers including a 900+-person steel mill that is under construction. With
just over 12,000 military and civilian personnel Barksdale Air Force Base gives this
community a significant military presence. High tech is a growing presence in this
region with the addition of Computer Science Corporation as the 800-job anchor of the
MSA’s National Cyber Research Park. Shreveport-Bossier is in the heart of a huge
deposit of natural gas called the Haynesville Shale
If the ―Louisiana family‖ had twins their counterparts would be the Lafayette
(162,800 jobs) and Houma (101,600 jobs) MSAs. Both have an unusually high
concentration of firms associated with the oil and gas extraction industry, so fluctuations
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Economic Outlook Page 28
in energy prices powerfully impact these two regions. They are, however, not identical
twins. Lafayette is more diverse, hosting the nation’s largest jewelry settings
manufacturer, a large, successful ambulance firm, and a firm that provides ER personnel
to hospitals in several states. Because of its location closer to the Gulf, Houma supports
major shipbuilding and fabrication firms and is home to Port Fourchon, a port that
services over 90% of the structures in the Gulf
The most closely watched MSA in the state over the next few years is likely to be
Lake Charles, (95,500 non-farm jobs). Like Baton Rouge, Lake Charles has an
unusually heavy chemical and refining base---the second largest concentration in
Louisiana after Baton Rouge. About three quarters of the $103 billion in announcement
industrial expansions are scheduled to occur within this MSA. The industrial
construction sector was already a major player in this region; now it is likely to expand
very dramatically. With three casinos (two very large), a racetrack, and a large Indian
casino nearby, Lake Charles is the state’s second largest gaming market. Another
unusual characteristic of this MSA’s economy is the large aircraft maintenance and repair
sector at Chennault Airpark.
Located in the northeastern area of the state, Monroe (78,900 non-farm workers)
is the second smallest of the eight MSAs. This MSA can brag of housing one of only two
Fortune 500 firms in Louisiana----CenturyLink. Chase has a large mortgage facility
Monroe, as does Wing Span Portfolio Advisors. The large Graphics Packaging facility
gives Monroe an out-sized presence in the paper and lumber sector.
If in this 8-child Louisiana family there was a toddler it would be the smallest
MSA---Alexandria. Located in the central part of the state, this MSA had 62,500 nonfarm jobs in 2014. There is a diverse mixture of major players in this MSA including
Cleco (a large utility company), Proctor & Gamble, Union Tank Car, Crest Industries,
and Roy O. Martin Lumber. One of the MSA’s jewels is England Airpark, which houses
Union Tank Car and recently became home of a 150-person Immigration and Customs
Transfer Facility. Alexandria has a strong military influence due to nearby Fort Polk--the largest single employer in the state.
In the sections below we will give a brief employment history of each of the
state’s eight MSAs, along with the Louisiana Econometric Model (LEM) forecast for
2015-16. In each MSA, we will explain the key factors and companies driving the
region’s future.
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Economic Outlook Page 29
The New Orleans MSA: Construction + Healthcare + High Tech + St. James
The New Orleans MSA is the largest in the state and it is about to get larger.
Presently, it is composed of seven parishes---Orleans, Plaquemine, Jefferson, St. Charles,
St. John the Baptist, St. Tammany, and St. Bernard. Beginning with the 2015 data, the
Bureau of Labor Statistics will add back St. James Parish to this group (the parish was
removed from this MSA back in 1990). GNO Inc.---the Chamber of Commerce an
economic development arm for this area---has been treating this parish like it is part of
the MSA. Next year, the employment data will officially include this 8th parish in this
mix. This addition will be huge for this MSA, because as we will see below, there are
some very large industrial projects scheduled for St. James Parish over the next few
years.
Employment in this MSA is now at about 553,100---still about 40 percent larger
than the Baton Rouge MSA. These eight parishes are located in ―the toe of the boot‖ (see
Map 5).
It has been a wild ride for this MSA over the last 33 years. The good news is the
MSA has enjoyed a solid recovery from the Great Recession despite the drag of a 4,500job loss at Huntington Avondale Shipyard. New hires in a hospital sector whose
construction is nearing an end, major industrial construction projects, new high tech firms
and the addition of St. James Parish portend a bright future for the New Orleans MSA.
History Pre-Katrina & Rita
Figure 10 tracks the non-farm employment history in New Orleans from 1980
through 2014. New Orleans suffered mightily during the 1981-87 recession, losing
40,400 jobs or 8.3 percent of its workforce. This MSA had more extraction sector
employees than any other area in the state in 1981---20,600. By 1987, problems in the oil
patch had driven that figure down by nearly 30 percent to 14,600, as many firms
relocated their headquarters operations to Houston and employment in the industry in
general declined.
New Orleans’ manufacturing sector also took a beating, falling from 61,300
workers in 1981 to 41,700 by 1987. Much of this decline occurred in the shipbuilding
segment of manufacturing which alone lost 6,900 jobs. Shipbuilding at the time was very
energy-focused with little diversity in its orders. Multiplier effects from these
shipbuilding layoffs dealt the MSA’s real estate, retail, services, and financial markets
punches that would have them floored until well into the 1990s.
Like the other MSAs with strong energy ties---Houma and Lafayette---New
Orleans began a slow recovery in the late 1980s. Then another round of layoffs at
Avondale Shipyards and the soft natural gas prices of 1991-92 flattened growth in 1992.
(This picture is distorted somewhat by the deletion in 1990 of St. James Parish
employment from the New Orleans MSA numbers.) A further blow occurred when the
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Economic Outlook Page 30
Challenger accident caused a slowdown in flights of that spacecraft. This meant fewer
flights and fewer external fuel tanks to be built by what was then Martin Marrietta.
The big jump in 1994 and 1995 shown in Figure 10 will look familiar to readers
who carefully examine these same two years in the graphs of the other two major casino
markets---Lake Charles and Shreveport/Bossier. Four riverboat casinos with about
3,300 workers opened during this time period. Secondly, the land-based casino opened
at a temporary site, and construction began on the massive permanent location at the foot
of Canal Street. This injection of new jobs was enough to generate healthy annualized
growth rates of 2.6 percent per year during 1994-95.
620
Fig. 10: New Orleans MSA Non-Farm Employment
1980-2014
Thousands
600 -40,400 Jobs
-8.3%
580
2002:
-10,300 jobs
(-1.7% )
560
2009-10:
-6,700 jobs
(-1.3% )
2005-06:
-133,700 jobs
(-21.8% )
540
520
2014
Compared to 2001 Peak:
-67,500 jobs (-11.9% )
500
480
2014: +7,500 (+1.4% )
460
80
85
90
95
00
05
10
New Orleans’ employment trend from 1999 to 2001 was virtually flat. Then, in
2001, employment in the region responded to the national recession and other events with
a one-year loss of 10,300 jobs, ranking it number five among the hardest hit MSAs in the
state by the post-911 national recession. Note in Figure 10 that the two years after the
recession---2003-04---were not particularly great recovery years. High natural gas prices
led to the closing of some ammonia fertilizer plants in the area and to general
sluggishness in the region’s large chemical industry. Employment rose at a moribund 0.5
percent rate a year. An important fact from examining Figure 10 is that for six straight
years before Katrina and Rita hit, employment in this MSA was virtually flat.
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Economic Outlook Page 31
The Impact of Katrina & Rita
Of course, the most profound message from Figure 10 is the impact of hurricanes
Katrina and Rita on the MSA. On an annual average basis, Katrina and Rita caused
employment to fall by a remarkable 133,700 jobs or 21.8 percent. These two storms
effectively drove New Orleans MSA’s employment back to levels it had not seen since
1977. Three decades of employment growth were wiped out overnight. According to
Figure 10, the New Orleans economy had recovered 72,500 of those jobs by 2014, but the
MSA employment is still lower than it was in 1980 and is still 65,500 below its 2001
peak employment year.
Actually, the use of annual average data in Figure 10 does a poor job of
illustrating how badly these storms impacted the New Orleans economy. On a monthly
basis the job-destruction was much greater than suggested by the annual average data.
By the time Rita had re-flooded New Orleans, the region had lost 177,900 jobs, an
astounding 29.5 percent decline.
Recovery rate very slow. A disheartening factor has been the slow recovery
since the storms. More frequently one would see a ―V‖ pattern in employment right after
a disaster as massive federal recovery and private insurance monies flow into the area for
the re-build effort. We saw this ―V‖ pattern, for example when observing the recovery in
Lake Charles and Pascagoula, Mississippi.
In New Orleans, the recovery looks like a ―kindergarten L‖. Why has the
recovery rate been so slow? Few would dispute that housing has been a key factor.
First, there is just the sheer size of the destruction. There were almost 182,000 homes
in the New Orleans MSA that incurred either severe or major damage, i.e. damage bad
enough to render the home uninhabitable. Some have estimated this is seven times more
homes destroyed than in any other natural disaster in our country’s history.
Secondly, these homes were rendered uninhabitable by flood waters. When
flood waters enter a home, regular home owner’s insurance no longer applies. The owner
must have purchased national flood insurance. As it turns out, 74 percent of these
homeowners had no flood insurance. Those who did have flood insurance discovered
that it covered only 80 percent of the pre-flood value of the home up to a maximum of
$250,000. Virtually every home owner, even if they had flood insurance, was left with a
gap in their coverage.
To cover this gap in coverage, the generous taxpayers in the other 48 states agreed
to send a pot of money to Louisiana and Mississippi to help homeowners bridge this gap--what was referred to in Louisiana as the ―Road Home‖ monies. These monies were
critical in rebuilding many of the homes. Still, there remain large swaths of New Orleans
East and St. Bernard Parish where people have simply chosen not to return.
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Economic Outlook Page 32
Finally, consider four other issues. Recall from Figure 10 that in the six years
before the storms hit the economy in New Orleans was basically flat. Families that had
been dispersed by the storms to Dallas, Houston, San Antonio or even other parts of
Louisiana, typically found themselves in much more robust economies with more, and
higher-paying, jobs. Secondly, it is a fact that public schools in the New Orleans area
were among the worst in the state (if not the nation). Dispersed families found
themselves in cities with much better public school systems. The good news is that the
advent of charter schools into the Orleans Parish system has apparently improved these
schools significantly. Thirdly, dispersed families watched with alarm the deteriorating
crime situation in New Orleans, and this no doubt retarded the return rate.
The Drag of the Great Recession
Finally, the Great Recession hindered this MSA's recovery. Bolstered by
massive amounts of construction spending to rebuild houses, levees, locks, etc., and the
boost from the availability of Go Zone funding, the New Orleans MSA actually enjoyed
employment growth in 2008. However, the drag of the national economy finally had an
impact in 2009 and 2010, when the MSA lost 6,700 jobs---a 1.3 percent decline. That
was actually not a bad performance considering that the national economy fell by 6.1
percent. The performance of the New Orleans MSA economy during the Great
Recession was actually the best performance relative to the state's other 7 MSAs (see
Table 8).
Solid Recovery from the Great Recession
Recovery from the negative impacts of the Great Recession has been impressive
for the New Orleans MSA. Note back in Figure 10 that the region has enjoyed four years
of solid growth. Indeed, the MSA had recovered all the jobs lost during the recession by
2012.
This performance is particularly impressive given that it occurred against the
backdrop of the 4,500+ layoffs at Huntington Avondale Shipyards, about two-thirds that
loss again at the Michoud Assembly Facility, and at least a $1 billion decline in Army
Corps of Engineers spending on rebuilding the area’s levee system.
Employment was up 1.0% in 2011, 1.2% in 2012, by a robust 3% in 2013, and is
on track to grow a very respectable 1.4% in 2014. That latter rate puts this MSA 5th
among Louisiana‟s eight MSAs. Normally, that growth rate would rank the MSA
higher, but the industrial boom we described in the assumptions section has created some
abnormally high growth rates in sister MSAs.
Forecast for 2015-16
Our projections for this MSA are shown down in Figure 11. We are projecting
that the New Orleans MSA employment will add 8,300 jobs (+1.5%) in 2015, and
9,000 jobs in 2016 (+1.6%). These are excellent growth rates In fact, there have been
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Economic Outlook Page 33
only seven years since 1980 where this MSA’s growth rate exceeded those we have
projected. This would rank the MSA’s performance fifth among the state’s eight MSAs
over the two-year forecast period, mainly because of spectacular growth projected in the
chemical corridor and the oil patch. The MSA will still be 48,200 jobs (-7.8%) below its
previous 2001 peak.
Fig. 11: New Orleans MSA Non-Farm Employment
Forecast: 2015-16
620
600
Thousands
580
560
540
520
2015: +8,300 (+1.5% )
2016: +9,000 (+1.6% )
500
5th Among 8 MSAs
480
460
80
85
90
95
00
05
10
15
Huge Bump from Hospitals
New Orleans is poised to enjoy a vigorous employment bump from its hospital
sector. After almost six years of construction work, the new medical complex in
downtown New Orleans is scheduled to begin opening in stages over our forecast period.
The first to open will be the new $1.06 billion, 424-bed University Medical
Center (UMC)---the replacement hospital for Big Charity which was destroyed by
Hurricanes Katrina and Rita. Ground was broken for this 5-building complex in April
2011, and it is scheduled to open in the spring of 2015. An enviable 1,100 net new
healthcare jobs will be associated with its opening.
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Economic Outlook Page 34
Following closely on the heels of the opening of the UMC will be the completion
and opening of the new $995 million, 240-bed VA Hospital. Construction started on this
facility back in June 2010. It is scheduled to open in February 2016. Approximately
2,200 healthcare workers will be employed at this hospital; an estimated 1,100 of them
will be net new hires to the region.
Economic developers outside this region would be green with envy at the prospect
of adding 2,100 high-wage healthcare jobs to their economies. Barring some very unusual
unforeseen incident, New Orleans has these jobs in the bank.
Record Industrial Construction Boom
Job growth emanating from the industrial construction sector will be either
excellent or really terrific over the next two years, depending on how some financing,
permitting, and FEED (front end engineering and design) are decided. We have
estimated that there are about $13.7 billion in industrial projects that have been
announced for this MSA recently.
Of that amount, about $3.6 billion is a dead solid perfect bet, because construction
has already started. One should not understate the size of this number. It would be a rare
event to find that level of industrial investment announced in the MSA in the past. About
$10.9 billion are in the ―potential‖ category, awaiting the financing, permitting or FEED
decisions mentioned above. Of this latter category, several are far enough along to be
considered ―high potential‖. It is also interesting that of these projects, almost $4.9
billion are in St. James Parish, which highlights how important the addition of this
parish to the MSA will be starting in 2015.
The following is a list of the projects that are underway:
 Entergy Corporation’s Nine Mile Point power plant is still under construction
near Westwego. This $721 million project was 65% complete in February 2014
and is scheduled to open at the end of 2015, adding 17 new jobs.
 Dyno Noble International began work on an $850 million ammonia production
facility at the Cornerstone Chemical Company site in Waggman in mid-2013.
The facility is scheduled to open in the latter part of 2016 , generating 65 new
jobs at an average of $55,700 annually. Cornerstone is also investing $175 on
maintenance and upgrades at its facility on the site.
 Marathon Refinery in Garyville is spending $108 million over 2014-15 on its
existing units to optimize diesel and gasoline yields at the refinery.
 Petroplex International began work in July 2014 on the first phase of two
phases of an $800 million tank farm and blending facility on the Mississippi
River in St. James Parish. Phase I represents a $400 million investment and is
included in our ―certainty‖ category, while Phase II (also $400 million) is
______________________________________________________________________________________
Economic Outlook Page 35
included as a ―potential‖ investment for the area. Phase II’s construction depends
on customer interest.

Zen Noh Corporation is in the midst of investing $47 million in its grain
elevator operations in St. James Parish. The company will add 12 new jobs.
 At the Plaquemines Port, Nola Tanking is spending between $80 million and
$100 million on the first stage of a tank farm at the Myrtle Grove Plantation.
Construction started in 2014 on this first phase. All three phases will cost $250
million and add a total of 60 to 70 jobs.
 At the Port of New Orleans, TCI Plastics is constructing a $36.5 million, 500,000
square foot logistics facility to package and ship PVC resins and polyethylene
and to manufacture plastic film. An estimated 160 jobs will be created averaging
$33,400 annually. This facility will not be fully operational until 2017 or 2018.
Looming out there is a huge number of potential projects for this region that have
been announced for this region that have not received the final ―go‖ authority from
investors. Our forecasts conservatively assume about 25% of these projects will get that
thumbs up. If the percentage turns out much higher than that, our job-growth projections
for this MSA will be far too low, because most of these projects immense category. In
the list below, note the number of times the word ―billion‖ is attached to a project:
 Marathon Refinery in Garyville plans to complete a feasibility study and
permitting for a proposed $2.5 billion residual oil upgrade expansion. The
project would convert heavy residual oil into ultra-low sulfur diesel. If approved,
construction would start in mid-2015 and opening would be scheduled for 2018
with 65 new jobs at $115,000 a year.
 Yuhuang Chemicals is examining a $1.85 billion, world-scale methanol plant in
St. James Parish. The company would hire 400 workers at $85,000 a year.
Construction would not begin until 2016, with the first phase opening to occur in
2018. As one of the state’s first wholly-owned Chinese companies, the methanol
produced by this plant is primarily for export to China.
 Also in St. James Parish, South Louisiana Methanol is near a final decision to
build a $1.3 billion ethanol plant---the largest in North America---across from the
Nucor plant. The company received its air permits in January 2014 and signed a
10-year agreement in July 2014 with Transcontinental Gas to transport gas to the
site. Construction would start in the second half of 2014, and the plant would
open in mid-2016. It would employ 63 people at $66,500 a year. We place a
high probability on this project proceeding.
 In July 2014, Nucor opened the first phase of its iron production plant in St.
James Parish. We place a high probability on construction beginning on the next
two phases at that site. Phase II is a $400 million reduced iron plant (+100 jobs),
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Economic Outlook Page 36
and Phase III is a $500 million pellet plant (+200 jobs). Construction on both
should begin over 2015-16.
 Last year, a Russian firm---Eurochem--- announced plans to construct a $1.5
billion ammonia-urea production plant in either St. John Parish---where an option
has been filed on land---or a site in Carville (in the Baton Rouge MSA) where a
$12 million site has been purchased. If constructed the plant would hire 200
workers at $58,000 a year. We place a below average probability on this
investment occurring in Louisiana.
 In St. Charles Parish, Valero Refinery is near a decision on constructing a $700
million methanol unit. If approved construction would start in 2015 or 2016 and
would ultimately ad 24 jobs to Valero’s workforce. We place a high probability
on this investment occurring.
 AM Agrigen Industries has FEED work underway for a $1.2 billion granulated
urea plant in St. Charles Parish. A decision is expected in 2015-I, with
construction to start in 2015-II and take 30 months to complete. The firm would
hire 150 permanent workers at $55,000 annually.
 In St. John the Baptist Parish, Etimine USA is examining the possibility of
constructing a $200 million boron manufacturing plant that would employ 200
employees at an average annual wage of $50,000. A final investment decision is
expected in 2015-I. The plant would open in late 2017 or early 2018.
 Ram Terminals at the Plaquemines Port wants to construct a $150 million coal
export terminal that would create 125 jobs. The company is at the permitting
stage, but is struggling with the fact that Governor Jindal wants to run a
Mississippi diversion project right through Ram’s property.
 Gavillon Commodities has offered plans to build a $250 million greenfield grain
elevator in St. James Parish that would employ 150. The company’s assets were
purchased in July 2013 by Marubeni, a Japanese corporation. Land was
purchased for $10.4 million for the site in January 2013.
 Wolverine Terminals wishes to build a $30 million crude oil terminal and
blending facility in St. James Parish that would hire 20 people paying them
$62,000 annually. At this writing the company is still awaiting air permits from
LDEQ and has had an approval withdrawn by the Parish Council in December
2013.
This is an impressive list of 11 projects that would demand a large number of
industrial construction jobs on site. Note that five are located in St. James Parish,
emphasizing again the importance of adding this parish to the MSA’s employment
prospects. We have only put a ―high probability‖ designation on three of them. Should
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just two or three more eventually evolve, our forecasts for this MSA will be far too
modest.
Public Construction: The Corps, Airport, State/Local
Described above were the industrial construction projects for this MSA. There
are also sizeable public projects either underway or scheduled over our forecast period.

The Army Corps of Engineers is continuing its extraordinary spending in this
region on its Hurricane and Storm Damage Risk Reduction System. Table 9
shows that the Corps’ planned spending on the HSDRRS will average right at $1
billion a year over 2014-16. This includes $614 million for a pump station at 17th
Street, London Avenue, and Orleans Avenue Canals and $65 million for the
construction of a floodgate in Plaquemines Parish.
Table 9
Army Corps of Engineers Actual & Planned Spending:
Hurricane and Storm Damage Risk Reduction System
Fiscal Year
Spend (Billions of Dollars)
2014
$0.942
2015
$1.185
2016
$0.940

A bumpy bid process has surrounded the contract for an $826 million upgrade of
the Louis Armstrong Airport. This figure includes $546 million for a 30-gate
terminal with three concourses and a parking garage on the north side of the
airport. Construction is to begin in mid-2015 and be completed in 2018 in time for
the 300th anniversary of New Orleans.

Other significant public projects include $204 million in spending in 2015 by the
Recovery School district and the Orleans Parish School Board, and $376.4
million in state road projects let over 2015-16. A $600 million project for the
Iberville redevelopment started in 2013-IV and will end in 2017-IV. Work
continues on the massive rebuild of public housing in the area. This $1.16
billion effort to rebuild Calliope, C.J. Peete, Lafitte, and St. Bernard projects
started in January 2008 and will run through 2015-17.
New Orleans: High Tech Center?
One of the sectors targeted for growth by GNO Inc. is the high tech sector, and no
small amount of success has resulted. GE Capital Technology dedicated a new
corporate office in New Orleans last year. The company has 100 employees now, and is
building toward another 300 information technology and software development jobs by
2015.
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Economic Outlook Page 38
4th Source announced it was moving its corporate headquarters to Kenner. Key
executives began arriving in mid-2014. The company plans to have 320 jobs in the MSA
by 2018. Finally, Performance Software announced a new software development
project for New Orleans in early 2014. The company will add 58 jobs at $75,000
annually.
Big Job Gains from Energy & Fedex
Substantial job gains for the MSA will come from two energy companies and
Fedex. On the energy side, Pelican Energy Consultants is spending $5 million on a
new facility in Madisonville. The firm plans to hire 195 people by the end of 2018.
These high-wage jobs pay an average of $90,000 a year. Chevron is adding 35,000
square feet of space in Covington which will be occupied by the end of 2016. The firm
plans to add 850 jobs.
The north shore was further buoyed by the recent announcement that Fedex was
beginning construction of a new 175,000 square foot distribution center in Covington.
Construction will start in early 2015, and when the facility opens in early 2016 it will
employ 800 people.
Good News at the Port
This has been a very good year for the Port of New Orleans. We wrote earlier of
the new investment by TCI Plastics planned at the Port. Officials at the Port were elated
to learn that Chiquita was moving its operations from Gulfport back to New Orleans.
This will mean 100 new jobs for longshoremen and an additional 60,000-78,000
containers a year (an increase of 15%) for the Port.
In February, another relocation to the Port was announced by International
Shipping Corporation. ISC is moving its headquarters back to New Orleans. It will be
housed in a 45,000-50,000 square foot facility in the Warehouse District and will bring
100 new jobs at $70,000 a year to the MSA.
Excellent Potential among Existing Manufacturers
Some of this region’s existing firms has an excellent outlook over 2015-16. This
is especially so at the Michoud Assembly Facility. Since the end of the Challenger
space flights, the MAC has suffered some massive layoffs, because this is where the
external fuel tanks were manufactured for that spacecraft. Now MAF is moving in the
more positive, opposite direction. It was selected as the site to build parts for the Space
Launch System (SLS). Two firms at MAF are primarily responsible for these tasks.
Boeing is charged with manufacturing the core stage for the SLS. Boeing employment is
up to 300 now, and the firm will be adding another 300 over the next 18 months.
Lockheed Martin is responsible for building the Orion capsule. That firm is at 240
employees now and will be adding 300 more over the next 18 months. The USDA
Finance Center at MAF handles human resource activities for many governmental
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Economic Outlook Page 39
agencies. Already at 1,700 employees, the Center is projected to add another 300 jobs
over the next 12 months and it is awaiting word on a potential contract that could lead to
1,000 more jobs.
Trinity Yachts has 150 employees at its New Orleans site and will be adding 100
more in late 2014. If the firm hits on some patrol boat contacts, it will add another 500
jobs. Limited launch capability inside the levee system at the New Orleans facility
means the focus of the plant must be on vessels made of aluminum rather than steel.
Trinity has had to diversify away from yachts to crew boats and other vessels because of
a weak yacht market. Officials there report this is the first time there has been a
disconnect between a booming stock market and yacht sales.
Finally, one of the region’s larger employers is Textron Marine with two
locations in the MSA. Textron is building hoover craft (the Ship-to-Shore Connector) for
the Navy along with armored vehicles for Canada. At 800 full- and part-time employees,
the company expects that number to remain stable over our forecast period.
Bleeding almost Over for Avondale
Despite the attraction of a number of new firms to the MSA in the recent past, we
have been compelled to temper our forecasts for the region due to the drag of
Huntington Industries Avondale Shipyard. Employing almost 5,200 people at one
point and ranked as the largest manufacturing employer in the state, Avondale is in the
process of being closed by Huntington Industries. The site will have about 500-600
workers through September 2104, then it will dismiss another 200-300 employees and
move the remainder to a site in Waggaman to compete for modular steel work from the
chemical and petroleum exploration companies. Huntington has partnered with Kinder
Morgan Energy Partners to find perhaps a berthing or container warehousing tenant for
the site. So far, no success has been reported, and few expect a new tenant to bring
5,000+ jobs to the site. At least the manufacturer will not be an employment drag on the
New Orleans economy going forward.
On a smaller negative note, in February, Cox Communications announced the
termination of 125 jobs in the New Orleans area.
Baton Rouge: An Epic Chemical Expansion + IBM
There are an estimated 394,200 jobs in this MSA, the second largest behind New
Orleans. It is the largest MSA in the state in terms of numbers of parishes---nine,
including East Baton Rouge, West Baton Rouge, Livingston, Ascension, Iberville, St.
Helena, Pointe Coupee, East Feliciana, and West Feliciana (see Map 5). In terms of
population, East Baton Rouge Parish was the most populous in the state in 2012
according to the Bureau of Economic Analysis.
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The authors have been monitoring the Baton Rouge economy for 40 years. We
have never seen an industrial expansion like the one underway in this MSA. We have
tabulated $14.6 billion in announced industrial expansions in this MSA. Of that
amount $5.5 billion is already underway or near completion and $9.1 billion are awaiting
financing, permitting or FEED work before beginning construction. In our forecast for
this MSA we have not accounted for 10% of these ―potential projects‖ reaching the
construction phase. If they do, our employment projections for the region will be
woefully short. What is equally exciting are some of the significant non-industrial
expansions announced for the region. It is difficult to temper one’s optimism about the
future for the Baton Rouge MSA.
Petrochemicals, Construction, Universities & Government
The petrochemical industry is a huge factor in this MSA’s economy. This MSA
has the largest concentration of chemical industry activity in Louisiana. Between the
three of them, East Baton Rouge, Ascension, and Iberville Parishes had 9,540 chemical
workers in 2012. Baton Rouge is home of the nation’s third (and the world’s twelfth)
largest refinery---ExxonMobil---located just north of the state capitol building. Placid
Refinery is also located in this MSA.
Because the petrochemical industry is very capital-intensive, when it expands, so
does the industrial construction. Industrial construction jobs are also closely tied to
―turnarounds‖ at these plants, i.e., when the plants are shut down completely for
scheduled maintenance. In June 2014, the Baton Rouge MSA had an unusually high
12.8% of its workforce in the construction sector, the second highest percentage in the
state. Only Lake Charles was higher at 14%. The comparable percentage for the whole
state was 7%. Turner Industries, Performance Contractors, CB&I, the Newtron Group,
and Cajun Contractors are among the larger industrial construction companies in the area.
The Baton Rouge MSA also is the location of the State Capitol and the vast
office complex associated with it. Two major state universities---LSU and Southern
University---are located in Baton Rouge, along with one of Louisiana’s largest
community colleges. Baton Rouge Community College is actually larger than Southern
University in terms of enrollment. This MSA is also home to an emerging high tech
sector, led by Electronic Arts game company and the large IBM facility that is under
construction.
Recent History of Baton Rouge
Figure 12 shows employment trends in the Baton Rouge MSA over 1980-14. This
MSA was only mildly touched by the terrible recessionary years of 1982-87. Baton
Rouge dropped 4,800 jobs or 2.2 percent of its workforce as compared to the 9 percent
decline in the state as a whole over that same period. Note the distinct jump in the
employment trend line in Figure 12 in 1990. This was due to the addition of five more
parishes to this MSA by the Department of Labor.
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The really good years. The years from 1988 to 2000 were heady ones in the
Baton Rouge MSA. This region had the most enviable growth record in the state in terms
of both size and consistency. The MSA immediately recovered the 1982-87 losses with a
banner year in 1988 when it gained 10,300 new jobs. Then the region’s employment
went straight up for 13 straight years over 1988-00, adding a robust average of 7,500 jobs
each time the calendar turned.
The really weak years. The tables decidedly turned against Baton Rouge over
the next four years. This 9-parish MSA lost 3,900 jobs or 1.1 percent of its workforce in
2001 due to the national recession---an unusually short and mild dip compared to what
happened nationally. Its recovery from that dip was nothing like that of 1988. It took
three years to recover the jobs lost in 2001, and those three years were ones of very
modest growth as seen in Figure 12.
Fig. 12: Baton Rouge MSA Non-Farm Employment
1980-2014
400
Statewide
Recession:
-9.0%
BTR: -2.2%
-4,800 Jobs
360
Thousands
2001:
-3,900 Jobs
(-1.1% )
2005-06:
The "Katrina Effect"
+18,500 jobs
(+5.4% )
320
280
Five Parishes Added X
240
New Record: 10/12
2014: +9,300 (2.4% )
2009-10:
-11,300 jobs
(-3.1% )
2nd Best in State
200
80
85
90
95
00
05
10
The culprit behind this slow growth pattern was the chemical industry. We have
already pointed out the dominant role played by this industry in the MSA’s economy.
The chemical sector was hurt by two factors. Initially, the national recession hit sales in
this sector very hard and weakened considerably the price of chemical products.
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Economic Outlook Page 42
However, the second factor was in many ways the most problematic. High natural gas
prices (see Figure 4) radically raised operating costs for these firms. Several chemical
firms in the MSA announced layoffs or closed either temporarily, partially, or
completely. The region’s ammonia fertilizer plants especially suffered.
The Katrina Effect
Evacuees in. Baton Rouge is the closest large MSA to New Orleans, so it
initially absorbed a huge number of evacuees. From FEMA assistance applications, we
estimate that the Baton Rouge MSA initially absorbed about 248,386 evacuees.
Overnight, the MSA‟s population exploded by over 34 percent. Traffic came to a
standstill across the area, supplies vanished from grocery stores and gasoline stations, and
every rental unit in the area was absorbed. There was a wild real estate period of about
one month when realtors were selling more houses in a week than in the previous year.
The median price for a single family home leapt 27 percent, the largest jump among the
151 MSAs surveyed by the National Association of Realtors. Sales tax collections in
East Baton Rouge Parish rose by 34 percent in September 2005.
Evacuees out. There was, of course, no way for the MSA to permanently absorb
a quarter of a million people over such a short time span, if for no other reason than there
were not enough jobs available to support that many people. For example, in November
2005, the traffic count on I-12 east of the I-12/I-10 split was up 22 percent over August
2005. By 2007 that count was up only 3.1 percent. On the I-10 bridge over the
Mississippi, the count initially jumped by 26 percent, November over August. By 2007
that count was up only 2.9 percent.
Table 10
Population Change by Parish
July 2005 – July 2007
Parish
Absolute Change
East Baton Rouge
18,121
Ascension
10,000
Livingston
9,100
West Baton Rouge
1,091
Pointe Coupee
564
St. Helena
437
East Feliciana
276
Iberville
272
West Feliciana
60
Source: U.S. Census Bureau
Percent Change
4.4%
11.2%
8.5%
5.1%
2.6%
4.3%
1.3%
0.8%
0.4%
More importantly, the Census Department made an estimate of the area’s
population as of July 2007. That estimate showed the MSA‟s 2007 population of
770,037 was up 39,921 over July 2005---a 5.5 percent increase. As seen in Table 10,
the bulk of that population increase occurred in East Baton Rouge (18,121), Ascension
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Economic Outlook Page 43
(10,000) and Livingston (9,100) Parishes. The area clearly experienced an ―evacuees in
– evacuees out‖ phenomenon. A similar phenomenon was experienced in Hattiesburg,
Mississippi and Mobile, Alabama.
Katrina boosted employment. Not only do the population numbers show that
this MSA benefited from the storms, the employment numbers shown in Figure 12
confirm that as well. The employment line in Figure 12 took a distinct upward turn in
2005 and 2006. The MSA’s employment rose by 18,500 jobs or 5.4 percent over this
period. Obviously such a rapid growth pattern could not be sustained long run.
2007: Construction Leads to a Strong Year
As seen back in Figure 12, the Baton Rouge MSA managed to continue the postKatrina, torrid pace of adding 9,000-10,000 jobs a year. Incentivized by the Go Zone
legislation a massive amount of new construction work began in 2007.
2009-10: Impacts of the Great Recession
It is clear from Figure 12 that the Great Recession had an impact on the Baton
Rouge MSA, though the region performed better than most in the country and the state.
To repeat, the national economy began losing jobs in January 2008 and U.S. employment
fell by 6.1 percent. By contrast, the Baton Rouge MSA did not lose the first job until
September 2008, and then it lost only 3.1% of its jobs---the second lowest loss of any
MSA in the state (see Table 8).
The MSA was not without some serious job losses during the recession. For
example:

Dow Chemical in Iberville Parish closed one facility (-160 jobs) and laid off 400
contract workers.

Trinity Marine closed its barge manufacturing facility in Port Allen (-190 jobs).

Capital One Bank closed its call center at a cost of 180 jobs.

Chase Bank closed its operations center, laying off 247 people.

Wells Fargo closed a call center, terminating 70.

IEM moved its headquarters to North Carolina, taking with it 50 very highpaying jobs.

Excide Batteries temporarily closed its shop, laying off 132 people.

In addition to these announcements, budgetary shortfalls in state government led
to layoffs in that sector of about 1,300 workers.
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Economic Outlook Page 44
Recovery from Great Recession Getting Stronger Each Year
Recovery from the Great Recession in the Baton Rouge MSA has been getting
stronger each year as seen back in Figure 12. Employment growth in 2011, 2012, 2013,
and 2014 were 1.4%, 1.9%, 2.6% and 2.4% respectively. By October 2012, the MSA
had recovered all the jobs lost during the Great Recession and began setting new
employment records. The MSA accomplished this despite a couple of significant
setbacks. First, the region lost 925 call center and distribution center jobs, including
the 400-person Home Depot call center. Secondly, state government faced some serious
financial challenges as a result of the recession and other factors. Governor Jindal has
steadfastly refused to solve these budgetary issues by raising taxes, which means cuts in
government spending have been the order of the day. As the state capital, Baton Rouge
has tended to bear the brunt of those cutbacks. Since July of 2009, state government has
shed 5,000 workers (-13%).
Forecast for 2015-16
Figure 13 contains our forecast of employment for this MSA for the next two
years. We estimate that in 2015, the Baton Rouge region will add 9,900 jobs (+2.5%)
and will follow that with an additional 9,700 jobs in 2016 (+2.4%). In percentage
terms, this would place the Baton Rouge MSA #2 compared to growth rates in the other 8
MSAs in the state. In absolute terms, its growth of 19,600 new jobs is projected to be the
fastest in the state. We are projecting that in 2015, this MSA will crack the 400,000job employment barrier for the first time in its history.
$16.0 Billion in Industrial Expansions!
The very strong recent, and projected, performance for the Baton Rouge MSA can
be heavily traced to the boom in the area’s chemical industry. As we pointed out back in
the assumptions section, natural gas prices have fallen sharply in the U.S. but have
actually risen in Europe. Chemical firms are prodigious users of natural gas. The price
advantage in the U.S. has been translated into a price advantage for our chemicals over
those produced in Europe. Consequently, U.S. firms are cutting into Europe’s share of
the world chemical market.
The Baton Rouge MSA is ideally situated to capitalize on this boom. There are
numerous pipelines already in place to deliver natural gas to the plants. There is an
abundance of available water (the Mississippi River), and there is an excellent waterway
for transporting the bulk production of this industry by barge (the Mississippi River).
These are the drivers behind the $16.0 billion in industrial announcements in the region.
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Economic Outlook Page 45
Fig. 13: Baton Rouge MSA Non-Farm Employment
Forecast: 2015-16
440
Cracks 400,000 barrier in 2015 X
400
Thousands
360
320
2015: +9,900 jobs (2.5% )
2016: +9,700 jobs (2.4% )
280
240
200
80
85
90
95
00
05
10
15
As mentioned above about $6.6 billion of this total are already under construction
(one—the $466 million Westlake Chemical Plant---is completed). The remaining $9.1
billion are awaiting financing, permitting or FEED work completion before beginning
construction. Our forecasts are not based on all of these ―potentials‖ making the
necessary cuts to get to construction. The following is a list of projects where the
decision has been made to proceed:

Dow Chemical will spend $1.06 billion on two polyolefin plants and other capital
upgrades. These projects should be completed by the end of 2016, and will add
71 new jobs at an average annual wage of $49,000.

In Ascension Parish the 1,600-person BASF plant is building two plants: (1) a
$300 million formic acid and surfactant facility (which will be completed this
year) and (2) a $42.6 million polyurethanes blending plant which should open in
2015-III. About 120 new jobs will be created.

$2.1 billion is being spent by CF Industries in Donaldsonville to build the
nation’s largest nitrogen fertilizer plant. It should be completed in February 2016
and employ 93 people.
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
Shintech`has $500 million in expansions underway at its facilities in Addis and
Plaquemines Parish. These will be finished in 2015 and add 10 jobs.

Also at the Shintech site, SE Tylose is constructing a $120 million chemical
plant. The company held a job fair this summer to hire 30 workers for the new
plant.

Methanex Corporation is in the process of spending $1.1 billion to move two
idle methanol plants from Chile to Ascension Parish. The complex will employ
165 people. The first plant opens in in late 2014 and the second in early 2016.
The firm is also examining the possibility of moving a third plant from Chile to
the Ascension site.

Honeywell is spending $80 million on expansions at two of its sites in Baton
Rouge and one in Geismar.

A Belgian firm---Katoen Natie---will soon break ground on a $150 million
plastics storage, packaging and distribution center in Baton Rouge. This laborintensive facility will employ 210 people.

Renewable Energy Group has purchased the closed Dynamic Fuels facility and
will spend $15 million to reopen the plant that makes fuels out of chicken fat. No
firm startup date has been given.

In Geismar, Lion Copolymer has announced it will add 60,000 to 88,000 of
production capacity to its plant. No capital investment figure or potential
employment figures were provided.

Genesis Energy announced in early 2014 its plans to build a $150 million, 1.1
million barrel storage terminal for oil, intermediates, and refined products at the
Port of Baton Rouge. The facility should be operational in 2015-II. No
employment numbers were provided.

Union Pacific Railroad is about 75% through a $500 million expansion in the
region that will enable the company to serve the expansions taking place in the
chemical industry.
There are approximately $9.4 billion in announced project where the final
decision to proceed have yet to be made. Each project has varying degrees of probability
of coming to fruition.

Shintech is close to a decision to begin constructing a $1.5 billion, grass-roots
ethylene plant in Iberville parish if the parish modifies the boundaries of the
Shintech Industrial Area. The firm has already applied for the necessary permits
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Economic Outlook Page 47
from LDEQ and has a feasibility study underway. We believe there is a high
probability of this project being built.

Avalon Rare Metals has still not begun its proposed $300 million rare earth
Hydro-metallurgical plant in Geismar. The firm did sign an agreement in March
with Brussels-based Solvay to process Avalon’s rare earth minerals into oxides at
Solvay’s plant in France. If constructed the plant would employ 175 workers. A
decision is expected at the end of 2014.

NFR BioEnergy announced it will move its headquarters from New York to
White Castle and begin spending $312 million to build 10 sugar-refining hubs that
will take bagasse and produce hardened energy pellets for use as fuel in global
power plants. An initial plant in White Castle should be ready for the 2015
harvest season. The firm would hire 127 by the end of 2016 and expects to be at
450 by 2019. The $312 million would be spent by the end of 2018.

Stepan Company is exploring the possibility of constructing a $60 million to $70
million plant in Geismar that would employ 33 people at an average annual wage
of $70,000. The firm would need to buy property from and use raw materials from
Shell’s Chemical plant. The firm is conducting FEED work now and expects a
final decision in 2015-II.

A Chinese company---composed of Connell Group of China and Sino Life
Insurance---is examining the possibility of building a $4.5 billion methanol plant
near Donaldsonville. The company would employ 500 people, and would export
their finished product to China with Post-Panamax ships. We remain in
contention with Galveston, Texas for this project. A decision is expected by
2015-II.

We have reported for at least the last two issues of the LEO on the prospects for
the BioNitrogen Corporation plant complex in Pointe Coupee Parish. The
company would construct five plants and hire 260 workers to make fertilizer out
of agricultural waste. $1.25 million in tax exempt bonds were approved by the
Louisiana Community Development authority in August 2013. The latest is that
the company is aiming for a 2015 construction date.

The Baton Rouge MSA remains in contention with St. John the Baptist Parish for
the $1.5 billion ammonia/urea plant proposed by the Russian company
EuroChem. EuroChem purchased a $12 million piece of property at Carville, but
it also has options on property in St. John the Baptist Parish. If the Carville site is
selected it would mean 200 new jobs at an annual average salary of $58,000. We
do not place a high probability on this project.

Finally, we are aware of rumors that Honeywell is considering a new multimillion dollar manufacturing complex that would be located at either Geismar or
Caddo Parish. This should be treated strictly as it was described---a rumor.
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Economic Outlook Page 48
This largess of construction projects has created a problem, though a happy one.
That is, where to get enough contract workers to build these projects? The Greater Baton
Rouge Industrial Alliance (GBRIA) recently conducted a survey to determine contract
labor demand needs just over the 18 months between January 2014 and June 2015.
Figure 14 shows the results of that survey. Employment needs will go from just under
24,000 to a peak of 28,000 in February 2015. What is interesting is that only one year
ago this employment number was at 17,500. That is a bump of 10,500 workers needed in
about 19 months. This means business will be especially strong for major industrial
contractors in the area such as Turner Industries, Performance Contractors, CB&I,
Cajun Contractors and the Newtron Group. Finding qualified people for these open
slots remains a great challenge to these companies.
Figure 14
Public Construction: Renovating CEBA & the Old Bridge + a New Institute
In addition to the industrial projects mentioned above there are sizeable public
projects underway in the Baton Rouge region. A $100 million renovation of the old
CEBA Building (now the Patrick F. Taylor Hall) on the LSU campus will begin this
November with completion expected in June 2017. Work continues on the $100 million
face lift on the Old Mississippi River Bridge.
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Much excitement accompanied the announcement of the construction of a new
Water Resources Research facility in downtown Baton Rouge. A $20 million
education/research center will be constructed on the old city dock which will be the home
of the Water Institute. Construction is to start in late 2014. A $16 million facility will
hold a 90X120 foot model of the Mississippi River from Donaldsonville to the Gulf, and
a $9 million building will be constructed to house the coastal office and research building
for the Coastal Protection & Restoration Authority. These two buildings are scheduled to
be finished in 2016.
Finally, over the next two years, $296.8 million in state road projects have been
let for the region, and an estimated $347 million in sewer repairs have been scheduled.
A ground-breaking took place in June on a new $54.4 million Lee High School in Baton
Rouge.
IBM Adds High Tech
Work continues in Downtown Baton Rouge the new 800-person IBM
Technology Center. IBM has already hired about 200 people who are working at a
temporary site on Essen Lane while construction begins downtown on a new $55 million
office tower, residential complex and garage. To ensure a supply of workers to IBM, the
state is investing $14 million over 10 years in LSU’s computer science program. IBM
will be adding about 200 jobs a year over 2015-16
Some Smaller Additions that Add Up
In addition to these larger announcements, the Baton Rouge region has attracted a
number of smaller firms whose employment together adds up to significant job growth.
Cox Communications is adding 87 jobs at its local call center. Jogler is relocating its
headquarters and manufacturing facility from Houston to the Industriplex in Baton
Rouge. Jogler manufactures liquid level indicators, sight flow indicators, level controls,
and other accessories for processing industries. The company will employ 60 people at an
average of $59,300 a year.
Cortec CMS is building a $6 million manufacturing/distribution facility in Port
Allen that will add 30 jobs at $55,000 a year. Glaz-Tech will construct a $4 million
glass manufacturing facility in Baton Rouge that will employ 50 people.
We continue to keep an eye on the Tuscaloosa Marine Shale (TMS). As
mentioned in our assumptions section, exploration companies appear to have ―cracked
the code‖ on how to mine this unusual shale play. On the basis of their technological
advances and improvements in efficiencies in drilling, both Goodrich Resources and
Halcon are stepping up their rig count in this play. Right now the employment numbers
are small. If present trends continue, this could become a very productive, job-generating
play.
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Economic Outlook Page 50
Layoffs, the ACA, Baton Rouge General & The EPA
We have basically described what might be viewed as a gusher of good news for
the Baton Rouge region. However, all is not perfect. There have been a couple of
significant layoffs and there are un-nerving concerns regarding some major employers in
the MSA.
There were two significant closures announced in the MSA in the last year. First,
Lion Copolymer closed its plant on Scenic Highway with the resulting loss of 150
company jobs and 115 contractor jobs. Second, in July CB&I announced it was closing
its pipe fabrication plant in Addis, a move that cost the area another 126 jobs.
Particularly un-nerving was in announcement in August that the Baton Rouge
General Hospital (BRGH) on Florida Boulevard would be closing its emergency room.
When the Earl K. Long Charity Hospital was closed, the Medicaid patients were
supposed to go to Our Lady of the Lake (OLOL) Hospital for care. Because the Florida
Boulevard hospital was closer, many indigent were showing up at its ER needing care but
having no money. Baton Rouge General was hemorrhaging losses because it was
receiving no reimbursement. Governor Jindal intervened and gave the hospital $18
million to tide it over until next June. What happens then? Those familiar with hospital
finances will argue it is difficult if not impossible to keep a hospital the size of BRGH on
Florida open without an ER. If the hospital ultimately closes, a loss of 1,000+ highpaying jobs in the area would not be out of the question.
We continue to watch nervously as the Affordable Care Act is implemented
across the country. Exactly how disruptive---or even if it will be disruptive---the full
implementation of the ACA will be remains an open question. Though there are strong
disagreements with the conclusion, there are reasonable arguments being made that the
ACA will ultimately result in a single-payer system, as exists in Canada and Britain. A
single-payer system would bring into jeopardy the existence of Blue Cross Blue Shield
of Louisiana. BCBS is headquartered in Baton Rouge and has a 1,800+ workforce. We
will have a much better view of how the ACA will impact the economy toward the end of
our forecast period.
A final source of concern is the new rules on ozone levels being considered by the
EPA. If the suggested level of 60 ppm is adopted, the entire Baton Rouge MSA will be
out of compliance. Many of the proposed new firms we listed above may not be able to
achieve these new standards. It is a worrisome issue on the horizon.
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Economic Outlook Page 51
Shreveport/Bossier: Bending the Curve toward Growth
This MSA is the third largest MSA in Louisiana with an estimated 171,500 nonfarm jobs in 2014. Located in the northwestern corner of the state, this MSA is now
comprised of four parishes---Caddo, Bossier, Webster, and DeSoto. Webster Parish is a
new addition to this MSA. Its employment numbers will be reflected in next year’s
numbers issued by the Louisiana Workforce Commission.
Shreveport-Bossier has the highest concentration of durable goods manufacturing
employment in the state, and that tends to make the area much more susceptible to
national recessions than Louisiana’s other seven MSAs. Among the large durable goods
manufacturers in the area are CellXion (a manufacturer of cellular towers), Frymaster
(manufacturer of deep fryers and similar products for McDonalds and KFC), and
Ternium, a steel components manufacturer. This group will soon be joined by Benteler
Steel, which we will discuss in the forecast section for this MSA.
It is also home of the state’s largest and most successful casino market. This
MSA now has six large river boat casinos plus the Harrah‟s Racetrack, which
together employed 5,641 people in FY2014. Bossier City is home for Barksdale Air
Force Base, an employer of 12,022 military/civilian workers and an important economic
driver for the area. Another big employer in the MSA is the LSU Health Sciences
Center with 5,260 employees. The Caddo-Bossier Port is home to several firms
including the Ternium steel firm, the Pratt recycling company, Ronpak, and Benteler
Steel. Altogether, tenants at the Port employ over 1,100 people.
This region has been the beneficiary of a huge economic jolt since 2008 in the
form of the Haynesville Shale---a very large deposit of natural gas. New technology has
made possible the harvesting of this field. In 2008, exploration companies pumped $4.5
billion in new dollars, about $3.2 billion of that in the form of mineral lease payments,
into the northwest section of the state. In 2009, that figure rose to $7 billion, of which
about $1 billion was in the form of mineral lease payments. This largess radically
impacted the influence of the Great Recession on this MSA's economy, as we will show
below. We will also note a considerable tailing off of activity in the shale recently.
Shreveport/Bossier Recent Employment History
Figure 15 tracks the employment history of this MSA over 1980-2014. The
Shreveport/Bossier area suffered through a prolonged, and deep, recessionary period
from 1985-89. While this decline was partially a result of a badly declining exploration
industry, that was not the main culprit. (The decline in 1990 was due to the substitution of
DeSoto Parish for Webster Parish in the MSA.)
1985-89: The AT&T effect. Both the depth and length (this MSA was the last in
the state to begin the recovery process) of the recession was due to one firm. AT&T had
a large phone equipment manufacturing facility in Shreveport that employed 7,450
people at its peak in 1984. The firm then began a major downsizing effort that ultimately
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Economic Outlook Page 52
dropped its employment to near 1,100. Those layoffs, combined with their negative
multiplier effects, caused the MSA’s employment to decline by 8.2 percent.
Casinos to the rescue. In 1990, the Shreveport/Bossier area began a slow assent
from the depths of its recession. Initially, job growth was positive, but anemic. Then in
1994, its employment began to rise rapidly---by an average of 4,600 jobs a year. The
source was riverboat casinos. These casinos have been among the most successful in
the state, because they have drawn heavily from the huge Dallas-Ft. Worth metroplex for
their customers.
Casinos added jobs to the region in another important way as well---the
construction of large hotels. Horseshoe Casino had a 25-story, 606-suite hotel; Casino
Magic operated a 94-room, 94-suite hotel; and Isle of Capri operated a 300-suite hotel.
These, of course, are pretty labor-intensive operations, so the MSA picked up a
significant employment boost here as well.
Durable goods dependence & national recessions. The years 2001-03 were
particularly difficult ones for this MSA. The MSA lost 3,900 jobs over this three-year
period or 2.3% of its workforce. In percentage terms and in length, it was the worst
decline in the state, not unexpected in a very durable goods-dependent region.
Fig. 15: Shreveport-Bossier MSA Non-Farm Employment
1980-2014
190
2001-03:
3,900 Jobs
(-2.3% )
US
Down 2 Years
2009
(-1.4% )
-4,200 Jobs
(-2.3% )
180
Thousands
170
160
2012-13:
GM
Barksdale
Haynesville
Libby Glass
150
-8.2%
(AT&T)
140
130
80
85
90
2014: +300 jobs (0.2% )
2nd worst in state
Webster added 2015
95
00
05
10
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Several factors played a role in this rather poor record. First, there was the
closure of some large manufacturing facilities in the area. In mid-2001, the Avaya
Communications (formerly, Lucent Technologies) closed its Shreveport plant, costing
the area 900 jobs. The Pennzoil Refinery was sold and dramatically cut back from 230
workers to only 85. Boeing closed its facility at the airport, laying off 162. Precision
Response closed its 250-person call center in early 2001. General Electric began the
process of transferring 400 positions at its industrial systems plant to another site in
Monterrey, Mexico. These were permanent layoffs.
Too, the state’s most successful casino market took a hit as business declined
with the recession. The area’s newest casino, Hollywood, reduced its workforce from
2,200 to 1,800. Three of the area’s five casinos reduced employment due to the recession.
Finally, a mixture of other firms, including Frymasters, Beaird, and Exide
Technologies imposed significant layoffs in 2002. Beaird, in particular, went from a
700- to a 30-person workforce.
GM, Beaird, and Frymaster stop the fall. The Shreveport/Bossier MSA turned
the corner in 2004 and grew for four years in a row, expanding at an average rate of 2
percent a year over 2004-07. Initially, General Motors was a key player in this
recovery. GM opened its new facility and hired 600 additional workers to begin testbuilding of the Hummer 3 at its old site. Its employment in the region jumped from about
2,400 to 3,600. However, a round of employee buyouts in 2007 dropped employment at
this plant back down to 2,153.
After taking over Beaird Manufacturing, the Eakin Company initially put that
firm back on an expansion path. Employment at the location jumped from 30 to about
570. Frymaster came back at an all-time high employment level of over 600 employees.
The new firm Steelscape (now Ternium)---a steel components manufacturer---opened at
the Port of Caddo-Bossier, creating 240 new jobs in 2007.
Haynesville & Barksdale Mitigate the Great Recession
As we mentioned earlier, normally this MSA is the hardest hit when a national
recession hits because of its high dependency on durable goods employment. For
example, note in Figure 15 that during the post 9-11 recession the U.S. economy lost jobs
for two years by a total of 1.4 percent. In contrast, the Shreveport-Bossier MSA's
employment fell for three straight years by a total of 2.3 percent.
When the Great Recession hit the result in Shreveport was almost turned on its
head compared to past history. The U.S. economy began losing jobs in January 2008.
Shreveport-Bossier did not lose its first job until 10 months later. The U.S. economy lost
6.1 % of its jobs; this MSA lost only 2.3 % and it only lost jobs in one year---the
only MSA to pull that off. Instead of ranking dead last in the state, Shreveport-Bossier
ranked 2nd in least jobs lost during the Great Recession.
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Economic Outlook Page 54
Haynesville flips recession effects. There were two key factors behind this
unusual performance. First and foremost was the tremendous amount of money pumped
into the economy by Haynesville Shale exploration over 2008-09. As we indicated
earlier, these funds amounted to $3.5 billion in 2008 and $7 billion in 2009, a whopping
injection of economic activity into the region's economy.
One indicator of how important the Haynesville Shale activity was during the
Great Recession is shown in local government sales tax collections, which are
illustrated for four northwest Haynesville parishes in Table 11. First note that during the
last post 9-11 recession three of the parishes experienced declines in collections (we were
unable to get the earlier data for Bossier Parish), just as normally happens in the face of a
national downturn. However, despite the length and depth of the Great Recession, local
sales tax collections rose in all four parishes over 2008-09, with unusually large
increases in 2009 in Red River Parish (+205.1%) and DeSoto Parish (+82.2%).
Table 11
Sales Tax Collections in Selected North Louisiana Parishes
Parish
Red River
2001
2008
2009
DeSoto
2001
2008
2009
Caddo
2001
2008
2009
Bossier
2002
2008
2009
Source: Author survey of parish finance offices
Percent Change In Sales Taxes
-3.1%
71.1%
205.1%
-0.8%
3.6%
82.2%
-0.8%
7.0%
1.4%
NA
4.1%
5.5%
Similar findings occurred in property taxes collected in five Haynesvilleimpacted parishes as seen in Table 12. Not only did property taxes increase dramatically
in all five parishes during the country's worst recession since the Great Depression, but
also it is clear from the last two columns that almost all of that growth was energyrelated. In Desoto Parish, property taxes increased by 3 ½ times. In Red River Parish the
increase was almost by a factor of seven. The Haynesville Shale was a huge factor in the
treasuries of these local governments.
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Economic Outlook Page 55
Table 12
Property Tax Collections in 5 Haynesville Shale-Impacted Parishes:
2005 Versus 2013
Parish
Property Taxes
Property Taxes
% Energy-
% Energy-
2005
2013
Related 2005
Related 2013
Desoto
$22,395,351
$78,432,531
18.9%
62.4%
Red River
$3,549,617
$21,927,425
3.6%
47.8%
Webster
$15,728,690
$25,342,948
17.1%
26.0%
Bossier
$52,449,881
$97,054,727
8.5%
16.1%
Caddo
$158,347,601
$230,350,740
2.8%
10.5%
Source: Louisiana Tax Commission
Barksdale deserves some credit. Of course, the awarding of the Global Strike
Command to Barksdale Air Force Base also helped mitigate the impact of the Great
Recession. By September 2009, 275 of the 900 jobs attached to the GSF had relocated to
Barksdale. In addition to the Global Strike Force, Barksdale gained part of 700 positions
it would ultimately secure via flight training jobs and the reopening of a weapons storage
area that are coming to the MSA.
Several closures still hit the area. The gains from the Haynesville Shale activity
and the additions at Barksdale did not mean the region escaped the recession unscathed.
Consider the following:

Problems at General Motors dropped its workforce from over 2,000 to about
800.

Capitol One Bank closed a 150-person call center.

Verizon closed a 300-person call center.

Market conditions turned against Beaird Industries in 2008, and it was closed at
a cost of about 400 jobs.

A weak U.S. housing market led to the closure of the Georgia Pacific plywood
plant in DeSoto Parish (-280 jobs), and the firm laid off 400 at its plant in
Springhill.
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Economic Outlook Page 56
Recovering From the Great Recession: Not the Normal Pattern
Note back in Figure 15 that the Shreveport-Bossier MSA actually started enjoying
job gains in 2010. The increase was only 400 jobs or about 0.2%, but this was the only
MSA in the state to grow that year. The region also had a good year in 2011, adding
2,100 jobs, a very respectable 1.2% growth rate.
This is the pattern one would normally expect to continue in a durable-goodsdependent economy---good solid growth on the recovery side of a recession. That
however, was not the pattern that has continued. The Shreveport-Bossier MSA lost
5,900 jobs over 2012 and 2013, a decline of 3.3%.
Several factors have contributed to this poor performance. First, the GM plant
closed August 2012, costing the region 800 high-paying jobs. Area and state economic
developers are hustling to find a replacement at the GM site, something we will discuss in
the forecasting section.
The Haynesville Shale has played a significant role in this 2-year employment
decline. After being responsible for shielding the MSA from much of the effects of the
Great Recession, activity in this shale has dropped precipitously. After reaching a peak
of 142 rigs in April 2010, the rig count in North Louisiana plummeted to only 23 in July
2013---an 84% decline. Fortunately, rig activity has begun to creep back up into the lowthirties range over the past calendar year.
What caused this rig movement out of the Haynesville play? The answer lies in
the rate of return on equity (ROI) data in Figure 16. Note that the ROI in the Haynesville
Shale is far lower than in the other plays shown. There are two reasons for this
differential. First, the wells in the Haynesville are deeper than in these other plays, so it
was costing more to drill a typical well---about $9.5 million per well in the Haynesville
versus $6 million in the Eagle Ford or Marcellus Plays. Secondly, the Haynesville Shale
is a "dry" play, i.e., when you drill you get only natural gas. In parts of the Eagle Ford,
Marcellus, Woodford, and Granite Wash exploration companies hit both natural gas and
the more highly priced oil. The latter are "wet" plays. The Haynesville is simply at a
serious disadvantage vis-à-vis many other natural gas plays in the U.S.
A third factor holding back this region’s economy has been a reduction in forces
at Barksdale AFB. The troop count which was 8,655 in 2012 is now at 7,577 and more
cuts are on the way. A 24-plane A-10C Wing was removed from the base in 2013. There
were 500 jobs directly tied to that wing, but luckily about 400 of those were absorbed
into the 307th Bomber Wing. Associated with all these reductions is obviously a
reduction in spending in the MSA that contributed to the region’s poor job performance
over 2012-13.
A final contributor to the recent decline is Libbey Glass. This firm reduced its
workforce by 200 in early 2013, moving these jobs to Toledo and Monterrey, Mexico.
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Economic Outlook Page 57
Fig. 16: Rate of Return on Equity: Various Shale Plays
50
45
48.3%
Liquids-Rich basins
Dry Gas Plays
Percent
40
34.0%
35
34.5%
30
25
24.0%
22.9%
20
15.9%
15
Cana
SW PA
Woodford Marcellus
Eagle
Ford
Granite
Wash
NE PA
HaynesMarcellus
ville
Source: Credit Suisse
This MSA finally made the turn---though not a very large one---toward growth in
2014, adding about 300 jobs. Its growth rate in that year of 0.3% was the second worst in
the state.
Shreveport/Bossier Forecast for 2015-16
Figure 17 shows our employment forecast for this MSA over the next two years.
We are projecting that the Shreveport/Bossier MSA will add 1,300 jobs in 2015
(+0.8%) and another 1,400 jobs in 2016 (+0.8%). While this will be a respectable
growth rate, it will not get the MSA back to its peak employment in 2008, nor will it
enable the MSA to retrieve the jobs that it has lost in 2012 and 2013. The MSA would
rank 6th in employment growth rate among the eight MSAs in Louisiana.
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Economic Outlook Page 58
Fig. 17: Shreveport-Bossier MSA Non-Farm Employment
Forecast: 2015-16
190
180
Thousands
170
160
150
2015: +1,300
2016: +1,400
140
(+0.8% )
(+0.8% )
Respectable, But
5,000 Jobs Below
2008 Peak
130
80
85
90
95
00
05
10
15
While its growth rate from a relative standpoint is weaker than average, there are
still strong points in the Shreveport-Bossier MSA that is strongly bending its employment
curve back toward solid growth. Consider the following nice economic development hits
the area has made:

Perhaps the most exciting piece of good news for this region was the
announcement in February that Computer Sciences Corporation would be
bringing an integrated technology center to the National Cyber Research Park.
CSC will be the anchor tenant at the Park and will bring 800 new jobs to the MSA
by 2017. CSC’s annual payroll is projected at $39 million.

Benteler Steel continues work on its $665 million tube mill at the Port of CaddoBossier. Benteler will be staffed to 200 by the end of this year and will be at 271
when the plant opens in 2015-II. A $227 million mini steel mill is also planned
for the site, while would drive Benteler’s employment to 675. Initially planned to
open in 2024, the firm is reportedly considering moving the construction of the
mini mill up.

Tele Performance Call Center has been in the process of adding 740 jobs to its
operation. That hiring should be completed by the end of this year.

In March it was announced that Integrico Composites was moving its
headquarters from Temple, Texas to Springhill. The company will make a $20
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Economic Outlook Page 59
million investment in a plant that converts recycle plastics into composite railroad
ties, crossings, and other transportation products. The company is bringing 300
new jobs to Webster Parish.

Module X Solutions will be constructing a $7.4 million, 750,000 square foot
manufacturing facility to make modular buildings for the telecommunications
industry. Construction work will be completed by 2015-IV, and the firm will
initially employ 257 with plans to go to 357 jobs by 2019.

An expansion has been announced for Fibrebond‟s concrete shelter business. The
company will spend $2.5 million to renovate an old paper mill in Webster Parish.
Approximately 225 new jobs will be created at the facility.

A plant that once housed a GM supplier is undergoing a $16 million renovation to
become the home for Lubrication Technologies. The firm is poised to hire 75
employees in 2014, another 35 by mid-2015, and another 40 in 2016.

Centric Pipe is spending $32.5 million to renovate the old Northwest Pipe
facility in Bossier City. The firm will make welded steel pipe and tubular
products for the oil and gas industry. The investment will allow the firm to retain
52 employees and hire an additional 82 people. All improvements should be
completed by 2017.

After announcing substantial layoffs in 2013, Libbey Glass decided to spend $20
million on new glass technology at its local site and add 70 jobs by the end of
2014.

Honeywell is spending over $89 million on expansions and upgrades at its facility
in this MSA.

In May, Regency Energy Partners indicated it would spend $260 million on a
new processing plant and new NGL pipeline at its Dubberly site in Webster
parish. This project should be finished by mid-2015.

This MSA still remains a magnet for sizeable road projects. Work on Segment K
(Shreveport to the Arkansas line) of I-49 has begun. Phase I---started in May of
this year---involves $31.5 million on the I-220 to MLK Boulevard, and Phase 2
starts in the fall of 2014 and will cost $137.7 million. In addition the state has let
$88.5 million in state road projects for 2015-16.
Potentials: Elio, Haynesville and Honeywell
In addition to these projects which are being undertaken, there are three sizeable
potential projects possible on the horizon. One is the Elio Motors project. This company
wants to rent 1.5 million square feet of space at the old GM plant to produce an enclosed,
3-wheeled vehicle that gets 84 mpg and costs only about $6,800. The vehicle is actually
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Economic Outlook Page 60
classified as a motorcycle by the federal government. The company has applied for a
$185 million advanced vehicle development loan from the Department of Energy. Paul
Elio says more than 27,000 people have reserved one. We have reported on this project
in the last two LEOs and remain somewhat skeptical that it will materialize.
We are watching with rising optimism the increasing rig count in the Haynesville
Shale. While the count is only up 7-8 rigs over the past year, there are two trends that
may push activity in this play much higher over the next two years. First, there is the
upward pressure on the price of natural gas caused by both (1) the huge industrial
expansions in South Louisiana and southeast Texas by very gas-intense chemical
operations and (2) the shift by electric power plants from coal to natural gas. Higher
natural gas prices will make this dry play more enticing to exploration companies.
Secondly, there have been some major improvements in efficiencies in drilling for
and harvesting natural gas from this play. Through aggressive transition to multi-well
pads, Chesapeake has driven its well costs down over 27% from $10.3 million a well in
2012 to $7.5 million per well in the first quarter of 2014.1 In additional to the gain in
efficiency in drilling costs, companies in the Haynesville Shale are also able to lift much
more gas per well than when this play first began. For example, according to the Energy
Information Administration the new-well production per rig has jumped by a factor of
five from just over 1 million cubic feet per day in 2009 to over 5 million cubic feet per
day in August 2014, and the trend of these efficiency gains is still upward.2 The
combination of higher prices and greater efficiencies should draw more rigs to this play.
Finally, we have heard rumors that Honeywell is examining the feasibility of a
large, $1.2 billion expansion in this area that could add 290+ jobs to the MSA. We repeat
that this is strictly a rumor and should be given exactly that much credence.
Two Un-nerving Issues: Barksdale & Caesars
We will be nervously watching two in the Shreveport-Bossier MSA over the next
two years. One is the region’s largest employer---Barksdale Air Force Base. Recently,
the Air Force indicated it would cut 167 positions at this base. The defense budget has
been shrinking under the Obama Administration, and the President has two more years in
his term. There is a real possibility of more bad news coming to Barksdale. On a more
positive note for the base, the Chief of Staff of the Air Force and the Secretary of the AF
have recommended that the Global Strike Command at the base be led by a 4-star general
(meaning more jobs) and the commander of the base believes there is a high probability
of attracting either an A-15 or and A-16 squadron to the base, which could mean
hundreds of new jobs.
A second large player to watch in this market is Caesar‟s Entertainment, a
company which owns Louisiana Downs Racetrack, and two casinos in the area--1
―Is Chesapeake Energy Making a Mistake Betting on this Marginal Play?‖, The Motley Fool, July 17,
2014, http://www.fool.com/investing/general/2014/07/17/is-chesapeake-making-a-mistake-betting-ont.aspx.
2
Drilling Productivity Report - Haynesville Region, Energy Information Administration, www.eia.gov.
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Economic Outlook Page 61
Harrah’s and the Horseshoe. Because of its financial difficulties, Caesars has broken its
holdings down into two groups: (1) ―life raft‖ and (2) ―down the tubes‖. Louisiana
Downs and Horseshoe are in the ―down the tubes‖ grouping. What exactly this means
ultimately for these two units is unclear. What is clear is that the company employs over
1,400 people at these two gaming sites.
Lafayette: Exploration Service Firms, Helicopters & High Tech
This MSA, located in south-central Louisiana (see Map 5), has been composed of
only two parishes---Lafayette, and St. Martin Parishes. Beginning with the 2015 labor
data, this MSA will expand by three parishes, adding Vermillion, Acadia, and Iberia.
The state's fourth largest MSA had about 162,800 people employed in 2014. This
number will obviously rise in 2015 if for no other reason than the addition of the three
parishes to the MSA.
A key to understanding this region’s economy is its geographic location. Located
in an oil-rich area and not far from the coast, Lafayette became a prime spot to locate
service firms, fabricators, and other companies that do business with extraction firms
exploring South Louisiana and in the Gulf of Mexico. Consequently, like Houma, the
Lafayette MSA is closely tied to all aspects of the oil and gas exploration industry.
The MSA derives 11.1% percent of its jobs directly from the exploration
industry, the highest concentration among the state’s eight MSAs (the comparable
number for Houma is 7.6%). Countless other jobs in the MSA are tied to the extraction
industry through the multiplier effect.
There are four deviations from this pattern. Stuller Settings is a 1,170-person
facility that is the nation’s largest jewelry settings manufacturer. Acadian Ambulance is
another large employer in the area whose ties are not all directly related to the extraction
industry, although the firm provides air-med helicopter services to the industry. This
company also monitors over 200,000 alarms in 40 states and monitors businesses and
houses via videos, eliminating the need for guards. It has also recently developed a major
safety program for offshore rigs and pipelines. A third, growing firm is the Schumacher
Group, which provides ER and hospital medicine doctors to hospitals in 23 states.
Finally, Lafayette is the home of one of the state's larger public universities---the
University of Louisiana at Lafayette. Until the mid-90s this area also hosted the largest
manufacturing employer in the state---Fruit-of-the-Loom---which had a huge facility near
St. Martinville. That facility has been shuttered.
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Recent History of Lafayette
Figure 18 displays the recent employment history in Lafayette and demonstrates
vividly the close ties this MSA has to the extraction industry. When oil prices
plummeted in the early 80s, so did the Lafayette economy. Remarkably, a fifth of the
MSA’s jobs disappeared over 1982-87. It was the worst downturn in Lafayette’s
recorded history. However, unlike similarly extraction-dependent Houma---which took
10 years to recover its losses from that recession---Lafayette came out of its ―V‖ much
quicker.
The key was diversification. In the late 1980s, the previously mentioned Fruitof-the-Loom constructed very large facilities in the area and in a short period of time
became the state’s largest manufacturing employer. By 1994, Lafayette had recovered all
its lost jobs and began setting new employment records. (This does not show up clearly
in Figure 18 because of the adjustment in the makeup of the MSA in 1990.)
Fig. 18: Lafayette MSA Non-Farm Employment
1980-2014
170
MSA Changes 2015:
+Iberia, Acadia, & Vermillion
160
Thousands
150
Late 2001:
Closure of
F-O-L
140
2009-10
-4,400 Jobs
(-3.0% )
130
120
-19.4%
Decline
110
New Record: 9/11
Earliest in the State
2014: +3,300 jobs (+2.1% )
100
X Acadia &
St. Landry Dropped
90
80
85
90
95
00
05
10
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Soft gas prices in 1992 set Lafayette back a bit, but like Houma, the hit was
nothing like the 1982-87 period. Surging employment at Fruit-of-the-Loom pushed
employment up briskly for the next couple of years.
Then Lafayette entered a ―bad news-good news‖ period. The bad news? As a
result of the North American Free Trade Agreement, Fruit-of-the-Loom began a round of
massive layoffs. The good news? Layoffs at Fruit-of-the-Loom coincided almost exactly
with two important events. One was a jump in oil and gas prices that sent the exploration
industry on a hiring binge. The other was a new entrant that both diversified the
economy even more and was labor-intensive to boot---Stuller Settings. Stuller hired
enough employees that it became the largest jewelry settings manufacturer in the U.S.
Lafayette employment expanded right through the Fruit-of-the-Loom layoffs.
The year 1999 was a bad one for Lafayette. Oil prices fell to under $10 a barrel,
and that sent the extraction industry into the layoff mode again. Forty-three hundred jobs
disappeared from the MSA (see the decline for 1999 shown in Figure 18).
For the next two years, Lafayette was back in the growth mode, setting new
employment records in 2001 when most other MSAs in the state were being depressed by
the national recession. Help in this recovery came from two sectors. Several significant
distribution centers, including the large Wal-Mart distribution center near Opelousas and
Magnolia Distribution Center in Lafayette, opened during this period. Then in 2001,
the MSA attracted the Cingular Wireless call center, which hired 1,200 employees.
Unfortunately, Lafayette experienced a big blow in November 2001 when Fruitof-the-Loom’s Martin Mills plant was shuttered, laying off 1,300. By this time, the post
9-11 national recession was also impacting Stuller Settings, which laid off about 175
employees. In 2003, Devon Energy transferred 60 employees out of Lafayette, and
Fleming Company---a wholesaler supplying the troubled K-Mart---closed its
distribution center there as well. The combination of these events, coupled with a
lackluster response of the extraction industry to high energy prices, kept this MSA in a
funk (-2,500 jobs) for three straight years.
The Impact of Katrina & Rita
It is obvious from examining the 2005 and 2006 data points in Figure 18 that
something special happened in this MSA in those two years. Non-farm employment
spiked upward by 10,800 jobs or 8.2 percent over those two years. What caused this nice
rebound in employment in Lafayette?
One factor was resurgence in the oil patch. The rig count rose from about 165
to over 201, which meant (1) new exploration jobs, (2) new exploration servicing jobs,
and (3) new oilfield-fabrication-associated jobs for the Lafayette area.
Indirect energy effects. But a larger factor by far was the impacts of Katrina and
Rita. These two storms impacted the Lafayette area in two broad ways. First, there were
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the spillover effects of the destruction of the offshore energy infrastructure. Both Katrina
and Rita were very destructive to the energy infrastructure in the Gulf of Mexico. A
total of 115 offshore platforms were destroyed and another 52 were damaged by the two
storms. Underwater pipeline systems were also damaged. Lafayette is the home to
several fabricators and oilfield service firms that garnered some of the repair work on
these facilities.
Evacuee effects. Secondly, Lafayette became a home to many evacuees after the
storms---about 34,336 by one estimate. Evidence from the Census Bureau suggests that
Lafayette has experienced the same population adjustment as Baton Rouge except on a
smaller scale. Census data indicate that between July 2005 and July 2007, the Lafayette
MSA population increased by 9,033---a heady 3.7 percent increase in only two years.
2007 to Early 08: $140 Barrel Oil Pumps Up the Region
Data indicate that the employment growth rate slowed from about 5,400 jobs a
year in the previous two years to a slower 4,000 jobs a year over 2007-08. Still, this
represented a very healthy growth rate of 2.8 percent a year---second only to Houma
among the state’s eight MSAs.
This slowdown was partially due to the completion of much of the Gulf of
Mexico rebuild effort, but also, Morton Salt closed its 197-person facility at Weeks
Island in 2007, one of the few bits of negative news coming out of this region. That was
somewhat offset by the Nucomm call center coming to Lafayette in 2007 adding 500
new jobs.
Growth in 2008 was initially spurred by a very robust oil patch as oil prices
reached record levels in the fall of 2008, and natural gas prices were unusually high as
well. Also, Acadian Ambulance built a $15 million expansion that led to 300 more jobs.
High Energy Prices and Job Declines in Lafayette?
However, a problem arose near the end of 2008. After peaking at $132.61 a
barrel in September 2008, the price of oil began a rapid, but temporary, slide down to a
bottom of $39.06 in March 2009. Employment in the Lafayette MSA responded as it
always does to declining oil prices. The state rig count fell from the 190 level to near
170. The MSA began recording job losses in the latter half of 2008.
But there was another factor in the MSA’s employment decline. Beginning in
April 2009 oil prices began to rise again and were at a very profitable $46.72 by May
2009. By August 2009 oil prices were over $70 a barrel, where they stayed well above
that level through the present. Despite these unusually high and very profitable energy
prices, the rig count in south Louisiana continued to fall. For example in August 2008,
when oil prices nudged $140 a barrel, the rig count in south Louisiana (land and water)
was 56 rigs. It fell to only 30 rigs in August 2009 despite very high oil and natural gas
prices. As seen in Figure 18, the Lafayette MSA lost jobs in 2009 and 2010---a total 2______________________________________________________________________________________
Economic Outlook Page 65
year decline of 4,400 jobs (-3%). We are unaware of any other time in the history of the
Lafayette economy when energy prices have been high and this economy has actually
lost jobs.
We believe there are two factors behind this poor behavior. First, our
conversations with decision makers in this field and region indicate that President
Obama‟s proposed $36 billion tax on the extraction industry sent a chill through this
sector and pushed down the rig count despite the presence of higher and very profitable
oil prices. We gave a detailed analysis of this tax proposal in the 2010 LEO. This tax
was proposed in President Obama's FY10 budget, but Congress was so absorbed in the
healthcare debate that this legislation did not come up for debate. However, the
administration has continued to promote it, so the threat to the industry still lingers. Of
course, a second factor was the difficulties associated with the oil spill, which we
described in detail back in the assumptions section of this report.
Recovery from the Great Recession: From Unbelievable to Believable Numbers
The Lafayette MSA has had a very healthy recovery from the recession, adding
15,200 jobs (+10.3%) over the four years from 2011-14. Job growth by year was: 2011 –
2.3%; 2012 – 3.0%; 2013 -2.6%, and 2014 – 2.1%. All of these are above average
growth rates and expected for a region tied to a surging exploration sector.
It is important to note the fact that this MSA (1) was the first to set new
employment records (in September 2011) after the losses incurred during the Great
Recession and (2) has had the best recovery record of all eight MSAs over the 201014 period (+10.3%).
Forecast for 2015 and 2016:
Figure 19 provides the reader with our projections for employment for this region
over the next two years. We are forecasting 2,900 jobs in 2015 (1.8%) and an
additional 2,800 jobs in 2016 (1.7%). These growth rates are very respectable and will
place the Lafayette MSA’s growth rate in 4th place among the state’s eight MSAs.
What is impressive about our forecast for this MSA is its immediate future is
driven by a diverse mix of firms. Certainly, petroleum-related companies are going to
play an over-sized role, but the region has also attracted two significant high tech firms
and a new helicopter manufacturer. Plus, three stalwarts of Lafayette’s stalwarts---that
are largely unrelated to the exploration industry---will remain key forces in the area’s
economy. The economy is becoming more diversified, and that is always a good thing.
A Surging Gulf Creates Business
In the assumptions section of the LEO, we wrote of how solidly the exploration
industry has come back after the setback of the oil spill in 2010. Not only has the Gulf
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Economic Outlook Page 66
fully recovered, but rig activity is setting new records in the deepwaters. That is good
news for a number of firms that service this hot industry. For example:

Frank‟s International is building a new 175,000 square foot operations center
and is adding 100 new jobs. The new center will be complete in 2015.

Halliburton has begun infrastructure work on a 100-acre, $45 million ―super
campus‖ in Iberia Parish. A major manufacturing and operations center will be
built there in stages. The company plans to hire 250 workers in the first year.

Also in Iberia Parish, Danos will start constructing a $23.2 million, 172,000
square foot offshore equipment and piping plant toward the end of 2014. This
will create 100 new jobs at the company’s site at the Port of Iberia.

Another gain for Iberia Parish is the firm National Oilwell Varco, which is
constructing a $23 million drilling technology facility. The company does drilling
repair services and re-manufacturing of riser materials and equipment for offshore
drilling services. This will result in 80 new jobs at $60,000a year and will enable
the company to retain about 1,800 jobs at 76 different locations in Louisiana.

A new $41.1 million expansion of the Newpark Mats and Integrated Services
Company will double its space in Carencro and add 35 new jobs at $43,500 a
year. The company provides leading edge matting solutions and well site
construction services to the oil and gas industry.

A really nice hit for the Lafayette region was the decision by Bell Helicopters to
spend $11.5 million on a plant to assemble new lines of SLS helicopters. The
new facility will be located in a new $26.3 million hangar at the Lafayette
Airport. Construction started on the facility in August 2014, and it should open in
June 2015. Anticipated hiring would be 115 jobs at an average of $55,000
annually. In related news, Precision Heliparts has doubled the size of its facility
to 10,000 square feet just 18 months after the firm opened.
Like Baton Rouge, New Orleans, and Shreveport-Bossier, Lafayette has also been
successful in attracting new high tech firms to the area.

A 38-year old Canadian information technology company---CGI---will be leasing
a 50,000 square foot $13.1 million building in ULL’s Research Park that will be
constructed between now and the end of 2015. CGI will hire 400 employees over
the next four years. Hiring will begin this year for these jobs that will pay, on the
average, $55,000 a year.

Enquero is a new software technology center that is coming to the Lafayette
Economic Development Authority through the latter’s business accelerator and
incubator. The company will use 2,000 square feet of space and will hire 650
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Economic Outlook Page 67
workers by 2017. These will be high-wage jobs, paying an average of $64,300
annually.

Perficient---A St Louis based company---is opening a new software development
firm in Lafayette. The firm will begin hiring in 2014-IV and have 50 people on
board by 2015. The firm plans to have 245 employees at the Lafayette site within
six years.
Fig. 19: Lafayette MSA Non-Farm Employment
Forecast: 2015-16
170
160
Thousands
150
140
130
120
2015: 2,900 jobs (1.8% )
2015: 2,800 jobs (1.7% )
110
100
X Acadia & St. Landry Dropped
90
80
85
90
95
00
05
10
15
The Lafayette MSA is blessed with three stalwarts in its economy that provide a
lot of jobs and stability to the region. Only one of them has any direct ties to the
exploration sector, which again helps add diversity to the MSA’s economy.
 Acadian Companies now has about 1,250 people employed in the Lafayette
MSA. The company employs 2,265 statewide and approximately 4,000
nationwide. While the company’s core business is ambulance service, it has
recently made a successful move into rig and pipeline safety. Acadian expects to
add 50-75 employees a year in its Lafayette market over 2015-16.
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Economic Outlook Page 68
 Lafayette is home to the nation’s largest jewelry setting manufacturer---Stuller
Settings. One of the regions’ larger employers, Stuller now has 1,170 people
working at its site. Employment at the facility is expected to remain stable over
2015-16.
 Another big player in the Lafayette economy is the Schumacher Group. This
company provides out-sourced ER and hospitalist doctors (ones who take care of
patients in hospitals) to healthcare facilities in 26 states. Employment in
Lafayette is 568, and nationwide it is 1,600. Schumacher plans to add about 50
jobs a year in the Lafayette market over 2015-16.
 This region will also benefit from $170 million in new state road projects over
2015-17. The largest project is a $121 million project at the junction of I10 East
and I-49.
Houma: Both Deep & Shallow Are Back
The Houma MSA is composed of two parishes---Lafourche and Terrebonne---and
this is one of the MSAs whose composition did not change when the Census Bureau
generated new MSA designations. Located in the south-central coastal area of the state
(see Map 5), Houma is highly dependent on the oil and gas extraction industry and the
spillover sectors---machinery, fabrication, shipbuilding, water-borne transportation---that
feed off of extraction activities.
In July 2014, 7.6% of the MSA’s employment was directly in oil and gas
extraction, more than double the statewide average of 2.7%. The key word in that last
sentence was "directly". There are many fabricators and shipbuilders in the MSA that
cater almost exclusively to the extraction industry. Plus, Terrebonne Parish is the home of
Port Fourchon, basically a small city on the Gulf, which services about 90 percent of the
offshore platforms and drill ships in the Gulf of Mexico.
Houma‟s Recent History
Figure 20 tracks the non-farm employment history of this MSA over 1980-2014.
What strikes an observer most in this graph is the unusually wild fluctuations in the
region’s employment over time. Because of its heavy dependency on the extraction
industry (the second heaviest of any MSA, behind Lafayette), wild fluctuations in energy
prices over the past 40 years have dramatically impacted Houma. The influence of
energy prices can be seen in the big ―V‖ and the little ―Vs‖ shown in this graph.
The BOOM years. The first, and biggest, ―V‖ occurred after one of the greatest
bull runs for any MSA in Louisiana history. From 1975-81, this MSA enjoyed a
remarkable period of growth in response to oil prices that peaked at $37.50 a barrel for
Louisiana crude in 1981. That would be about $98.29 a barrel in today’s prices.
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Economic Outlook Page 69
The BUST years. A big ―V‖---covering the period from 1981-91---followed this
boom period. The marked decline in oil and gas prices between 1982 and 87 sent this
region into a free-fall. Some 17,200 jobs or nearly a quarter of the workforce vanished.
Car dealerships, restaurants, banks, and any retail establishment suffered through a
terrible period as the MSA shed a quarter of its jobs. Houma was the worst hit MSA in
the state by this recession. It took a decade for Houma to recover all the jobs lost during
this dramatic downturn.
The long road back. When oil and gas prices recovered somewhat from 198791, this metro area rose up the other side of the ―V‖. Exploration activity in Louisiana
has been moving southward across the state since the 1950s, indeed, heading further and
further offshore in the Gulf. Houma’s geographic location on the coast made it the ideal
site from which to launch offshore exploration.
Fig. 20: Houma MSA Non-Farm Employment
1980-2014
110
100
Thousands
90
2009-11:
-4,900 Jobs
(-5.0% )
6th of 8 MSAs
1997: New Record
(10 Years)
X
80
-24.6%
Decline
70
2014: +2,100 (2.1% )
Tied: 3rd Best in State
New Record: Feb. 2013!
60
50
80
85
90
95
00
05
10
The little “Vs”. Still, every time energy prices got soft, Houma’s employment
declined. The MSA lost 1,500 jobs in 1992 when natural gas prices declined as a result
of two straight unusually warm winters, and it lost 3,100 jobs in 1999 due to low oil
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Economic Outlook Page 70
prices. Interestingly, Houma went through the post-911 U.S. recession unscathed. In
fact, the MSA picked up 5,000 new jobs over 2001-02 when most of the other regions of
the state were in absolute decline.
Note in Figure 20 that the ―Vs‖ have been getting shallower and shallower. This
is primarily because the extraction industry is running much leaner now and has learned
not to respond too strongly to rising energy prices. The firms that lend money to
extraction firms have learned the same lesson.
Still it is important to note in Figure 20 that there has always been a left side to
the “V”. That is, after energy prices have remained high for an extended period, the
extraction industry has always responded by returning to the oil patch to take advantage
of the higher prices. At least that was true until 2004. Response to the run up in oil and
natural gas prices at that time was more tepid than expected in 2004, with little change in
the rig count. In fact, Houma was the worst performing MSA in Louisiana in that year.
Legacy lawsuit effects. We believe this poor response resulted from industry
fears generated by ―legacy‖ cases, in particular the Corbello case. In the time since the
Corbello case, the industry has been lobbying hard for tort reforms to correct their
perception of abuses arising out of the Corbello case. A degree of success has been
achieved. One of the factors that made the Corbello case so onerous to the industry was
that much of the settlement was based on allegations that drilling had impaired the
ground water supplies. The great majority of the Corbello award was for this damage,
and the plaintiff could simply pocket the award and was not required to use the award to
correct the problem. Act 1166 required that if damage was alleged to have occurred to a
water aquifer, the award must be used to correct the problem. That eliminated a lot of the
incentive for suing extraction companies.
Secondly, in the Terrebonne Parish School Board v Castex case the School
Board was suing to require the oil company to backfill canals that were dredged years
ago. This was especially troubling to the extraction companies because there are
thousands of miles of these canals across the southern part of the state and the cost of
filling them would be astronomical. The Louisiana Supreme Court over-ruled this
judgment and said firms cannot be required to backfill a canal unless it was specified in
the initial contract to drill. It was also determined that when permission is given to drill,
there will always be a ―footprint‖ that will be left that is reasonable to that activity. If the
footprint is excessive and not reasonable to that activity, the landowner has a right to sue.
Despite the reforms and legislation passed in the regular session of the State Legislature
during 2006, several legacy lawsuits are still active in the state.
The Katrina & Rita Effects
Like Lafayette, Houma received a nice injection of activity as a result of the two
hurricanes. Over the three years of 2005-07, Houma gained a whopping 12,400 jobs,
a remarkable increase of 14.9 percent or 5 percent per year. It was the fastest
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Economic Outlook Page 71
growing area of the state. In fact, growth in Houma was so strong that in 2007, Houma
moved past Lake Charles to the fifth largest MSA in the state.
The source of this employment reversal is much the same as occurred in
Lafayette. First, there was finally a response in the oil patch to higher oil and natural
gas prices. As an MSA heavily laden with exploration companies, oil service firms, and
shipbuilders for the offshore sector, Houma benefited from this resurgence. Too, this
MSA is home to many fabricating and repair/maintenance firms that benefited from the
rebuild effort of offshore energy infrastructure that was damaged by Katrina and Rita.
Finally, Houma also benefited somewhat from an influx of evacuees. Houma, at
58 miles, is the closest MSA to New Orleans (Baton Rouge is 79 miles from New
Orleans). Based on FEMA assistance applications, we estimated that this MSA’s
population ballooned upward by 62,810 people in the first two weeks after Katrina--second only to Baton Rouge in attracting evacuees.
However, like Baton Rouge, Houma experienced the same population adjustment
as did Baton Rouge and Lafayette. Census Bureau data show that between July 2005
and July 2007, the Houma MSA population increased by 3,449 people or about 1.7
percent. This is slightly more than the MSA tends to grow anyway. Thus, there has been
an exodus of evacuees from the MSA, but a number have remained there as new
residents, giving a bit of an extra boost to the retailers, real estate firms, and service
providers in the area.
2008-09: High Energy Prices & Job Losses??
The experience in the Houma MSA over these two years pretty much mimics that
of the Lafayette MSA. 2008 started out strongly as oil prices climbed to a high of
$132.61 a barrel in September 2008. Then the price of oil began a rapid slide down to a
bottom of $39.06 in March 2009.
Beginning in April 2009 oil prices began to rise again and were at a very
profitable $46.72 by May 2009. Oil prices have continued to rise as seen back in Figure
3.
However, despite these very profitable energy prices, the Houma MSA was the
first MSA in the state to begin losing jobs during the Great Recession---recording its first
job loss in August 2008. Over 2009-10 the MSA lost 4,800 jobs---a 4.9 percent decline--ranking its performance 6th among the eight MSAs in the state. It is historically
unprecedented for this MSA to be losing jobs in the face of relatively high energy
prices. We believe the reason for this poor performance mirrors a similar weak
performance in nearby Lafayette: the chilling effect of President Obama's proposed new
taxes on the extraction industry. In addition to the extraction firms cutting back, Gulf
Island Fabricators and nearby J. Ray McDermott laid off workers in 2009, and Offshore
Specialty Fabricators laid off 90 workers that year.
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Economic Outlook Page 72
2011: Oops - Forgot about BP
In our 30 years of producing the Louisiana Economic Outlook, few things have
surprised us more than the performance of the Houma economy in 2011. In the LEO
released in the fall of 2010---six months after the oil spill and in the middle of the
moratorium on drilling---we projected significant job losses for the area. Eleven
deepwater drill ships left the Gulf, and activity at Port Fourchon dropped 35-40% below
pre-spill levels. Normally, that would translate into a major decline in employment in the
MSA.
What we failed to take into account was the massive amount of money that BP
would pump into the area's economy for the cleanup effort and to pay out on claims for
losses due to the spill. While we do not have a good handle on the cleanup spending
(which we know was quite large), we do have relatively good information on the amount
BP paid to businesses and individuals who claimed losses due to the spill.
As of August 2011, BP had paid out $132.1 million in claims in Terrebonne
Parish and $81 million in claims in Lafourche Parish. As a reference point, that is
about 3.1% of Terrebonne Parish personal income and about 2.1% of personal income in
Lafourche Parish. The combination of BP's cleanup expenditures and its payouts to
claimants was sufficient enough to overcome slowdowns in exploration and cause a very
modest 100-job loss in 2011 instead of the 1,500-job loss we predicted in the 2011-12
LEO.
2012-14: Strong Bounce Back
As seen back in Figure 20, the past two years have been very good for the Houma
MSA. The MSA has added 9,200 jobs over those three years. That is an average growth
rate of 3.3% a year, an enviable achievement compared to most MSA’s in the country.
Its growth rate in 2014 is estimated at 2.1%---tying Lafayette as the third highest among
Louisiana’s eight MSAs. Only the exceptionally booming Lake Charles and Baton
Rouge MSAs performed better. Note in Figure 20 that (1) in 2013, the Houma MSA
blew past its previous employment peak of 2008 and (2) in 2014 the MSA crossed
the 100,000 employment mark for the first time in its history.
The comeback in the Gulf is largely responsible for this surge. Not only did
exploration activity return and surpass its previous peak, but also Gulf Island added
several hundred workers and Chouest's new shipyard, LaShip opened and is up to 1,200
employees. The major port servicing the offshore industry, Port Fourchon, has turned
from retrenching to bustling. It has been a very good three years indeed.
Forecast for 2015-16: A Vibrant Gulf Creates Opportunities
We are projecting that the Houma MSA’s employment growth over the next two
years will be the third fastest in the state in percentage terms. Normally, the fine growth
rates we are projecting for Houma would put this MSA at the top of the list, but the
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Economic Outlook Page 73
historically huge construction boom in Baton Rouge and Lake Charles have moved these
two MSAs to the top of the heap.
Houma’s forecasts are shown in Figure 21. We are estimating that the Houma
MSA employment will increase by 2,300 jobs in 2015 (2.3%) and by another 2,200
jobs in 2016 (2.1%). In essence, this economy will have once again "gone up the other
side of another V" and restored all the jobs lost during the Great Recession and the BP
spill.
A Return to both Deep and Shallow Waters
Exploration activity in the Gulf has rebounded even better than most had
expected. Before the spill, there were 33 rigs working the deepwaters of the Gulf.
Immediately after the spill the rig count dropped to 11. As of 2014, the count has not
only come back, but it has also moved past the previous record to around 50 rigs now.
Some of the more recent forecasts we have seen are for the count to move past 60+ in
2017, more than doubling the pre-spill rate.
Fig. 21: Houma MSA Non-Farm Employment
Forecast: 2015-16
110
New Record: July 2013
Past 100,000 in 2014
100
Thousands
90
80
70
2015: 2,300 jobs (2.3% )
2016: 2,200 jobs (2.1% )
3rd fastest in state!
60
50
80
85
90
95
00
05
10
15
______________________________________________________________________________________
Economic Outlook Page 74
What is equally encouraging has been the recent hike in activity in the shallow
waters of the Gulf. The new developments in 3D seismic techniques coupled with new
horizontal drilling methods learned from mining the shale plays has drawn such
independents as Apache, Energy XXI, Saratoga, and Fieldwood Energy back to the shelf.
The companies are discovering they can go back to fields that had been tapped by
vertically drilled wells, and horizontally drill several miles through the rock and get up to
20 times the production from the vertical wells.
Finally, we remind readers of our discussion in the assumptions section about
what is going on regarding Mexico and the Gulf of Mexico. The combination of the
Pacto por Mexico and the Trans-Boundary Hydrocarbons Agreement will open up whole
new sections of the Gulf that were off limits before. More availability means more
exploration and more service work for firms out of the Houma area.
All this new action has stirred up a beehive of activity in the Houma MSA. For
example:
 Port Fourchon is on a very rapid expansion path. Slips A and B at the Port are
totally leased out. The Port will spend $260 million and $290 million in 2015
and 2016, respectively, on capital projects. The 7,000 foot long Slip C is already
75% leased out. The Port will begin work on Slip D in 2015 which will add 350
additional acres of property. The Bureau of Safety and Environmental
Enforcement (BSEE) indicates that 95% of all new exploration plans in the Gulf
cite Port Fourchon as their supply base.
 More activity in the Gulf means more supply boats will be needed. Edison
Chouest‟s 1,200 person LaShip shipyard is adding another panel line and a large
engineering office that will boost employment by 400. The company’s North
American Shipyard---now at 650-700 workers---would like to add another 150.
EC has 25 vessels under construction for operation in the Gulf, and each needs a
crew of 35-40 mariners. That means at least 875 crew member jobs over the next
two years. The company is working on ―Project X‖ which it estimates a 50%
chance of landing. If it wins the project, another 3,000 to 4,000 workers will be
needed.
 Gulf Island Fabricators is very active, with its employment back up to 1,100.
The firm will be adding 300 jobs a year over the next two years. The return of
shallow water exploration in the Gulf has generated a number of new projects for
Gulf Island and the firm will be bidding on some large deepwater projects in
2015. Because of its skilled fabrication workers, the firm will also be bidding on
some of the steel work associated with the chemical boom in Baton Rouge, Lake
Charles, and southeast Texas.
 In Gray, Danos will be finishing up a new $10 million headquarters building in
late 2014. Approximately new high-paying ($75,000 annually) 326 new jobs will
be associated with that site. Just outside of this MSA, Danos will be starting up a
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Economic Outlook Page 75
new manufacturing facility at the old J. Ray McDermott property new Morgan
City. One hundred new jobs will be created at that site in 2015.
 Bollinger Shipyards is now at about 3,000 employees and is finishing up a new
yard at Port Fourchon in early 2015 that will require 100 new employees.
Bollinger is in the midst of a $1.5 billion, 34-boat contract with the Coast Guard
to build the Fast Response Cutter. The company just received a $255 million
contract for 6 more of the ships in the 2014 budget, and Bollinger has been
assured that 6 more ships are in the 2015 budget.
 In March, Harvey Gulf International announced plans to construct a $25 million
offshore LNG refueling facility at Port Fourchon. It will be built in two phases:
Phase 1 has been started in Slip B and Phase 2 will begin shortly after Phase 1 is
completed.
 Another large energy-related firm---Chett Morrison---is now at 400 employees
and expects that figure to remain stable over our forecast period.
There are some significant construction projects scheduled for the Houma MSA
over 2015-16. Two of them are coastal restoration projects that were announced in
early 2014. $144.6 million will be spent to rebuild Cheniere Caminada headland beach in
Lafourche Parish, and another $66 million has been designated for a long-distance
sediment pipeline in Lafourche and Jefferson Parishes. The state will be letting $90
million in state road projects over 2015-16, the largest being about $36.6 million to
relocate LA 1 from Leeville to Golden Meadow. Finally, Governor Jindal announced in
September that Virdia Inc. will spend $60 million on a new biochemical plant to be
located next to the Raceland Raw Sugar mill in Lafourche Parish. The company will turn
bagasse into a high-value industrial sugars and biofuels. The plant should be finished by
the end of 2016 and employ 81 people.
The future looks very bright for this MSA on the coast.
Lake Charles: How Many Synonyms for the Word “Huge”?
Located in the far southwestern corner of Louisiana (see Map 5), the Lake Charles
MSA is composed of two parishes---Calcasieu and Cameron. This MSA is dominated by
three industries. One is what is broadly referred to as the petrochemical industry. This
phrase handily combines two closely related industries---chemicals and refining. The
Lake Area Industrial Alliance reports that Calcasieu Parish was the home to 20 different
chemical plants and two refineries. Total employment in these facilities was 6,764
direct employees and 4,273 contractors in 2012 according to the LAIA. Like the Baton
Rouge area, this huge capital-intensive petrochemical complex supports a very large
industrial construction industry.
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A second major industry in Lake Charles is gambling. Pre-Rita, Lake Charles
was home to five riverboat casinos. Now there are two in operation and one large one
under construction, plus the Delta Downs Racetrack. The largest operational casino is
L‟Auberge du Lac, which opened in the summer of 2005. Hurricane Rita badly
damaged both of the casinos owned by Harrah’s. Harrah’s sold its two licenses to
Pinnacle Entertainment, owner of L’Auberge du Lac. Pinnacle moved a license to Baton
Rouge. This year, Isle of Capri closed one of its smaller riverboats and moved that
license to Shreveport. Total employment at the two operating casinos and the racetrack is
at about 3,240 as of 2014-II. We will discuss the status of the new Golden Nugget
Casino that is under construction in the forecast section below.
With the closest gambling establishments to the Houston metroplex, Lake
Charles’ riverboat casinos were an instant success when they opened in the mid-1990s.
When Delta Downs added slot machines and became a ―racino‖, it added another 1,057
workers to the area’s gambling industry, a number that has drifted down to 755.
A third key sector is aircraft repair. There are now two significant employers
located at Chennault Industrial Airpark---Northrop Grumman and AAR (formerly
Aeroframe Services). Changes in tenants at Chennault have had a major impact on the
MSA’s employment pattern over time. Closely allied with the aircraft industry, two
significant employers at Lake Charles Regional Airport are Era Helicopters with 750
employees and PHI---another helicopter service firm. A relatively new firm---CB&I
Modular Solutions (formerly Shaw)---has about 1,000 workers whose main focus to
date has been manufacturing modular equipment for the nuclear power industry.
A History of Ups and Downs
A history of the Lake Charles economy is depicted in Figure 22. This MSA
suffered mightily between 1981 and 1986 as the chemical industry reeled from a huge
loss of sales in its foreign markets. The region lost a whopping 17.9 percent of its nonfarm jobs. This loss was caused by a large run up in the exchange value of the dollar.
Not only did the industry itself reduce employment by one-third, but capital expansion
plans were also halted, hammering the industrial construction sector at the same time.
Coincidentally, the Reagan Administration fully deregulated the price of crude
oil in the early 1980s. One side effect of this action was that several marginal refineries
found it increasingly difficult to remain competitive and shut down. The loss of jobs in
the two highest-wage industries in Louisiana’s manufacturing sector, combined with a
shuddering halt to industrial construction and other negative multiplier effects, sent the
Lake Charles economy into a serious, 5-year dive.
Lake Charles was actually the first MSA in Louisiana to begin recovering from
the terrible statewide recession of 1982-87. The key was the attraction of Boeing
Aircraft to Chennault Field. Boeing created over 2,000 jobs to refurbish K-135 transport
airplanes for the Air Force. That helped set Lake Charles off on a recovery mode. The
recovery was further aided by a sudden drop in the exchange value of the dollar, which
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Economic Outlook Page 77
rejuvenated foreign markets for the chemical firms and set them off on a new round of
hiring and capital expansions. (Note the magnitude of this recovery is distorted in Figure
22 by the addition of Cameron Parish employment data to this MSA’s job statistics.)
Fig. 22: Lake Charles MSA Non-Farm Employment
1980-2014
96
92
88
2009-10:
-5,900 JObs
(-6.3% )
Worst in State
Thousands
84
80
76
X Cameron Parish Added
72
68
2014: +3.5%
Best in State
New Record: Oct. 2013
-17.9%
64
60
56
1980
1985
1990
1995
2000
2005
2010
In 1992, Boeing announced the closure of its facility, and the job loss there caused
Lake Charles’ employment to slide sideways for two years. The next three years were
excellent growth years for Lake Charles. Three factors powered this expansion. First,
there were some unusually large capital projects under construction in the petrochemical
sector. Citgo and Conoco/Pennzoil combined for $1.6 billion in expansions during this
period.
Secondly, it was during this period that the riverboat casinos came to Lake
Charles. Thirdly, Boeing was replaced at Chennault Airpark by Northrop Grumman--a facility that took 707s, stripped them down, and installed the Joint System Target
Attack Radar System (JSTARS) in them. This was an addition of 1,900 good-paying
jobs for the Lake Charles economy.
It is obvious from Figure 22 that the good times ended for Lake Charles in 1999.
The MSA lost 2,800 jobs in that year and was essentially flat for the next six years.
There were several contributors to this poor performance. The first involved hits at the
aircraft repair facilities at Chennault Airpark. As Northrop Grumman came near the end
of its JSTARS contract, the firm began handling fewer aircraft and consequently began
terminating workers. NG reverted to doing maintenance, repair and overhaul (MRO)
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Economic Outlook Page 78
work on the JSTARS aircraft, and its workforce dropped all the way down to 350. The
attraction of EADS to Chennault helped offset NG layoffs somewhat, but even that firm
reduced its workforce from about 350 down to 160 before selling to Aeroframe
Services.
Secondly, a combination of 9/11 and the national recession reduced trips to the
area gambling establishments, prompting layoffs there. Thirdly, Xspedius moved its
headquarters office in Lake Charles to St. Louis.
But by far the most important contributor to the downturn was the funk in the
chemical industry. High natural gas prices forced this vitally important industry in Lake
Charles to hunker down and look for ways to reduce costs. One way was to reduce the
number of employees. Too, the industry placed capital expansion projects on hold and
delayed maintenance/repair work as much as was safely feasible. The result was a
significant reduction in industrial construction employment.
The Surprising “Rita Effect”
What may surprise readers the most about the data in Figure 22 is the growth in
2005 and 2006. Despite being hit by a vicious storm, this MSA’s employment actually
grew---adding 2,700 jobs over those two years. The larger portion of that growth
occurred in 2005, the year of the hurricane.
Rita's impact on housing. There were 47,384 homes damaged by Rita in this
MSA---but only 2,284 incurred severe damage and 6,673 major damage. Residents could
and did return to the Lake Charles area fairly quickly. Normally one would be aghast at
these figures, but against the backdrop of the housing destruction in New Orleans, they
pale. It is very important to note that with the exception of lower Cameron Parish (the
most sparsely populated parish in the state) there was virtually no flood water damage
in Lake Charles. That means regular homeowner’s insurance was applicable to the
damage. As a result, all the impediments to rebuilding that existed in New Orleans due to
standing flood waters did not exist in Lake Charles.
Rita‟s impact on Lake Charles manufacturing. It is the nature of the
manufacturing industries in Lake Charles that they would seemingly be very vulnerable
to a powerful storm like Rita. Chemical plants and refineries are very capital-intensive,
and all their capital is outside and exposed to the elements. In fact, three refineries in the
area were damaged and shut down: (1) Citgo (324,000 b/d); ConocoPhillips (239,400
b/d), and (3) Calcasieu (30,000 b/d). All three were back up by December 2005.
Also, the aircraft industry, which operates in large hangers, seemed likely victims
of high winds. Despite these vulnerabilities, these industries made it through the storm
without losing much downtime. There was $40 million in damage to hangers at
Chennault, but the two firms operating there continued to do so despite the
inconvenience.
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Importantly, staffing was not as difficult a problem as in New Orleans because
most housing remained intact in Lake Charles.
Rita‟s impact on the Lake Charles gaming sector. As a result of Rita the two
Isle of Capri-owned casinos and the L’Auberge du Lac encountered minor damage and
were reopened by November 2005. However, the two Harrah’s riverboats were badly
damaged by the hurricane. Again, Pinnacle Entertainment, which owns L’Auberge du
Lac, purchased both of Harrah’s licenses in Lake Charles. Pinnacle returned one license
to the Gaming Control Commission and moved the other license to Baton Rouge.
Rita‟s impact on other sectors. A look at other sectors in Lake Charles indicates
a solid recovery in the aftermath of the storm. By January 2005, all hospitals in the MSA
except one in Cameron Parish were fully operational. The Lake Charles Regional
Airport began operating at an even higher level than pre-Rita. By contrast, the New
Orleans airport was still operating below pre-Katrina levels in 2011.
Within a month of Rita’s landfall, all of the public schools in the MSA had
reopened and virtually all hotel room space was back to normal by the end of 2006. The
Port of Lake Charles escaped any flooding by Rita. However, it did experience about
$40 million in wind damage and initially had no power. Within a few days power was
restored and the port was open to receive shallow water vessels.
Careful reviewers may have noticed another important fact back in Figure 22. In
2007 Lake Charles MSA set a new record in employment---exceeding the previous
peak by 2,100 jobs. Construction associated with the storm recovery was still robust in
2007, about 2,200 jobs higher than just after Rita. However, construction’s growth
peaked in 2007 and was slightly lower in 2008, constituting something of a temporary
drag on the area economy.
The Great Recession Felt Hardest Here
Among Louisiana's eight MSAs, none suffered more than the Lake Charles MSA
from the Great Recession. Although this MSA's employment began to slide later than the
national economy---in February 2009 as compared to January 2008---2009 was
particularly harsh on the region. In that year the MSA shed 3,700 jobs and then it lost
another 2,200 in 2010---an employment drop over two years of 6.3%. This is a worse
decline than that experienced at the national level (6.1%).
What was behind this poor performance over 2009-10?
factors, including:

There were several
In 2008 Citgo announced it was closing its 192-peron lube plant which added to
the drag of reduced construction spending.
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Economic Outlook Page 80

Aeroframe, which does maintenance work for FedEx and US Airways aircraft
had to reduce its workforce from 475 to 250 as both firms idled many of their jets
due to the sagging global economy.

The weak national economy hurt business at the area's important casino industry.

During this period the region's petrochemical firms really tightened their belts
especially with regard to capital projects. This is illustrated below in Table 13
which contains data supplied by the Lake Industrial Alliance Association which
shows an almost 3,000-job decline in contractor jobs at area plants over 200710. Fortunately, the data for 2011-12 show this downward trend was reversed,
and in the case of contract workers has almost doubled from the 2010 trough.
Table 13
Employment in Lake Charles Area Petrochemical Plants
Year
2005
2006
2007
2008
2009
2010
2011
2012

Full Time Employees
6,401
6,158
6,221
6,070
6,042
5,961
6,683
6,754
Contract Employees
3,003
2,830
5,412
3,572
3,070
2,456
3,265
4,273
The region was delivered a blow in the Summer of 2010 when Pinnacle
announced it was stopping construction on the Sugarcane Bay Casino and was
turning in that license to the Gaming Control Board. It should be noted that the
combination of the Great Recession and the unusually weak recovery negatively
impacted the casino market. As seen in Figure 23, casino revenues statewide
dropped 8.7% between FY08 and FY11, and rose only 0.3% in FY12 before
picking up a bit to 1.3% in FY13.
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Economic Outlook Page 81
Fig. 23: Louisiana Casino Revenues by Fiscal Year
1,900,000,000
1,800,000,000
FY13:
+1.2%
1,700,000,000
1,600,000,000
1,500,000,000
2008-11:-8.7%
1,400,000,000
1,300,000,000
1,200,000,000
1998
2000
2002
2004
2006
2008
2010
2012
Fiscal Year
Finally: A Growth Year in 2012
Referring back to Figure 22, readers will notice the beginnings of a recovery in
2011 (+600 jobs) and very good growth over 2012-14. In fact, the latest data indicate
Lake Charles is the fastest growing MSA in the state. In July 2014, employment in the
Lake Charles MSA was up 4.1%----quadruple the rate of the state as a whole. What is
particularly impressive about this performance is it was accomplished despite the fact that
a major employer---Dynamic Industries---basically shut down its 500-person operation
in Lake Charles in 2013. The firm won phase I work on manufacturing components for
the Marine Well Container project. However, the company was unsuccessful in landing
phase II, so terminated its operations in this region.
On a far more positive note, during this period Shaw Modular Solutions opened
its new facility and now has about 1,000 employees now. Aeroframe added employees
as one of its key customers---FedEx---began to fly more planes. Importantly, turnover
work at area petrochemical firms rose from $350 million in 2010 to over $800 million in
2012, and area chemical firms in general were enjoying an increase in business due to
increased exports. Note back in Table 13 that LIAA surveys indicate direct employment
in petrochemical firms jumped by 793 employees over 2011-12 and contract employment
rose a whopping 1,817 jobs over that same time period.
Ground-breaking took place on the $500 million Golden Nugget Casino in July
of 2012. Work began on a $176 million expansion at Sasol and at the Lake Charles Port,
IFG started construction on phase I of a new $59.5 million grain elevator. Even more
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Economic Outlook Page 82
importantly, $5.6 billion worth of work began on the first two ―trains‖ at Cheniere‟s new
LNG export terminal. We will have more to say about this project below.
2014: The Real Boom Begins
As Lake Charles entered 2014, we began to see the first evidence of a massive
boom in this corner of the state unlike any we have ever seen before. By mid-year 2014
we had tabulated almost $81.7 billion in announced industrial projects for the MSA.
We have been monitoring the state’s economy for four decades; this figure exceeds the
best year of announcements for the whole state by a factor of at least 10.
Of this total, we estimate that $30.2 billion of these projects are already
underway, and approximately $51.5 billion are at the financing, permitting or FEED
stage (that is, they are still ―potential‖ projects). It is important to note that these are the
industrial announcements. The $72.4 billion figure does not include the $700 million
being spent to construct the Golden Nugget Casino which will open at the end of this
year.
One result of this largess has been a pronounced elevation in the region’s
employment growth rate as seen back in Figure 22. Based on data for the first seven
months of the year, we estimate employment in the Lake Charles MSA will growth
by an impressive 3.5% overall in 2014---the fastest rate in the state and 3 ½ times
the rate we have estimated for the state as a whole. There is a very good chance that
we have under-estimated Lake Charles’ growth rate, because its employment growth rate
in July was 4.1%, buttressed by a remarkable 25.2% increase in construction
employment. In July, this MSA was growing four times faster than the state as a whole.
It was also in 2014 that Lake Charles moved past is old 2008 employment peak and
began to set new employment records.
Forecast for 2015-16: Immense, Mammoth, Enormous – How Many Synonyms for
“Huge”?
Figure 24 shows our forecasts for the Lake Charles MSA over the next two years.
We are expecting Lake Charles to add 5,500 jobs in 2015 and another 6,500 jobs in
2016---a stellar increase of 12.1% over this period. No other MSA in the state is
expected to come close to this growth rate. The closest should be Baton Rouge at 4.9%.
We project that in 2015 this MSA will break through a barrier which has been seemingly
illusive since the mid-90s---over 100,000 employed. Our difficulty in writing up the
Lake Charles forecast is finding enough synonyms for the word ―huge‖!
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Economic Outlook Page 83
Fig. 24: Lake Charles MSA Non-Farm Employment
Forecast: 2015-16
110
+100,00 for first time
100
X
Thousands
90
80
70
1990:
Cameron Added X
2015: 5,500 jobs (6.3% )
2016: 6,500 jobs (5.8% )
Best in State!
60
50
80
85
90
95
00
05
10
15
Massive Construction: LNG Exports, G-T-Ls, General Chemical, Others
Leading the pack of massive capital investments are five firms that are, or are
planning to, construct LNG export terminals. These are the biggest investments in the
area by far (with one exception). While three of these projects are still at the ―potential‖
stage, the good news is that two are under construction.

Construction on Sabine Pass LNG by Cheniere Energy is well underway.
Cheniere has six 20-year contracts in hand for buying its product. Importantly,
the company also has a permit from the Department of Energy to export to nonfree trade partners of the U.S., a permit that is absolutely vital before one of these
terminals can begin construction. Cheniere will spend $20 billion on this 6-train
project. This would make it the largest single capital investment in Louisiana
history, if not U.S. history. The first two trains are about 40% complete, and
Cheniere is aiming for a mid-2017 startup. The firm will create 148 new, highpaying ($100,000 a year) jobs and retain 77 jobs.
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Economic Outlook Page 84

Sempra Energy just announced that construction will begin on its Cameron LNG
project. This export terminal will be a 3-train unit and cost $10 billion to
construct. In February 2014, Sempra received final approval in September to
export to non-free trade partners of the U.S. Some $7.5 billion in financing is
being provided by Japanese lenders.

Also receiving conditional approval to export to non-free trade partners was Lake
Charles Exports or Trunkline. LCE plans to build a 3-train facility at a cost of
$10 billion. The firm has applied to the Federal Energy Regulatory Commission
(FERC) to start construction by mid-2015. Financial support for the project has
been secured from BG Group and Southern Union. We place a high probability
on this project proceeding.

An Australian company---Magnolia LNG---is examining the possibility of
constructing a 4-train LNG export facility at the Port of Lake Charles.
Construction cost of this plant is estimated at $3.7 billion. Financing was
completed in May 2014 with the sale of 90,000 shares of stock. A formal
application to begin construction was filed with FERC in that same month, with
the aim of starting construction in mid-2015. Under that schedule the plant would
open in mid-2018, hiring 65 people at $75,000 a year. We place a medium-tohigh probability on this project proceeding to construction.

The final LNG export facility proposed for this area is one by Southern
California Telephone & Energy (SCTE). SCTE purchased 232 acres on
Monkey Island to build a 6-train, $9 billion liquefaction plant. In July 2014, the
company filed a permit with FERC and submitted a permit to the Department of
Energy for permission to export to non-free trade partners.
In addition to these huge LNG export projects, there are other large projects under
consideration to build general chemical facilities or Gas-to-Liquids (GTL) plants. Like
the LNG export terminals, several of these projects are quite large, and they too vary in
terms of probabilities of actually being constructed.
 By far the largest of these projects are the two proposed by Sasol. This South
African company already has a significant presence in the Lake Charles
economy. Sasol has proposed building two projects which together exceed in
size the huge Cheniere liquefaction plant mentioned above.
o Sasol is very close to pulling the trigger on its proposed $5-$7 billion
ethylene cracker and derivatives project. In September 2014, the
Army Corps of Engineers issued the last set of required permits, and the
company will make a go/no-go decision to proceed near the end of 2014.
A construction contract has already been agreed to with Fluor
Construction. Once completed the facility would employ 528 Sasol
employees plus 358 contract workers. We place a high probability on this
project proceeding.
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Economic Outlook Page 85
o The larger of Sasol’s two projects is its proposed $11-$14 billion Gas-toLiquids facility. The company would take natural gas and produce from
it 96,000 b/d of diesel, naphtha, and other chemical products. The final
decision on this plant would come 18-24 months after the decision on its
proposed ethylene cracker plant. This huge facility would employ 700
people. As mentioned on page 13 of the assumptions section, this final
decision will hinge heavily on Sasol’s belief in the persistence of a wide
gap between oil and natural gas prices.
 Lake Charles Clean Energy (formerly, Leucadia) has been weighing the
possibility of constructing a plant at the Port of Lake Charles for several years
now. The firm latest proposal is for a $2.6 billion methanol plant, with the
methanol being produced from pet coke coming (1) from nearby refineries and
(2) from imports. The proposed facility would employ 165 once built, and the
desire is to make a final decision by the end of 2014. Given all the construction
activity in the area, LCCE is struggling to find a financially feasible EPC
(engineering, procurement, construction) contract. The Port received a $10
million grant in September to expand Bulk Terminal 1, a critical link in getting
this project up and running.
 Another large plant proposed for the Port of Lake Charles is a $1.5 billion GTL
plant by G2X Energy. The firm’s intent is for an end-of-2014 construction start
date. Air permits have been secured but water (and some other) permits are still
pending. This plant would have three modules: (1) one to convert natural gas
into methanol, (2) a second to refine methanol into liquid propane and 87-octane
zero sulfur gasoline and (3) a unit composed of cooling towers, waste treatment
and other auxiliary units. Once operational, the new plant would employ 243
workers at an average annual wage of $66,500.
 One of Lake Charles’ larger employers---Axiall Corporation---with 1,250
employees presently in the area has chosen the MSA for a proposed $3 billion
suite of facilities. The new units would include a world-scale ethane cracker and
an ethylene derivatives plant. This project would be a joint venture with Lotte (a
South Korean company), and would ultimately employ 250 people. If approved
by Axiall’s Board in 2015-I, construction would start that year with an opening
date of late 2018.
 We are watching the Phillips Refinery closely for a decision on whether to make
the $800 million investment to produce a low sulfur content diesel. At this
writing no decision had been made on this large project.
 Finally, Juniper LNG is investigating the possibility of building a $100 million
plant to manufacture diesels, waxes, and naphtha at a Praxair site in Westlake.
The company will renovate dormant steam methane reformer, where cleanup
work has already begun to take place. Twenty-nine new jobs would be
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Economic Outlook Page 86
associated with this new plant. We place a high probability on this project
occurring.
Come on Construction Workers!
One can imagine the enormous demand for construction labor that will
accompany over $81.7 billion in current and potential industrial projects. Staff at the
Southwest Louisiana Alliance (SWLA) has looked at staffing models for all the projects
that have engineering, procurement, and construction agreements (EPCs) in place. Ones
with EPCs are projects for which a definite ―go‖ decision has been made. The results of
their survey are shown in Figure 25. According to SWLA surveys, the demand for
construction workers in the one-year period from August 2014 to August 2015 will
jump from about 6,500 to nearly 10,500---approximately 4,000 additional workers
needed! It is important to note that these numbers do not include the workers needed to
construct the $10 billion LNG export terminal facility for Sempra, which was not
announced until after the survey was taken, nor does it include Sasol’s ethylene cracker
complex which is very close to a positive decision.
Figure 25
SWLA Estimates of Construction Worker Demand for Projects Proceeding
Busy at the Port & Housing Issues
These prodigious capital investments have already created predictable responses
in the community. Readers will note that several of the projects mentioned above are
within the boundaries of the Port of Lake Charles. As a result, the Port is preparing for
this onslaught by spending $35 million on a new dock at its bulk facility, and it will
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Economic Outlook Page 87
spend $45 million on a liquid dock/lay berth if Lake Charles Clean Energy proceeds with
its project.
As regional planners observed this tidal wave of workers coming to the region,
the natural question was, ―where will they live?’ There is not enough apartment or single
housing rental property to absorb this many workers. Borrowing a page from the
booming state of North Dakota, entrepreneurs are developing temporary housing for the
period during the barrage of construction.
At the Port of Lake Charles, Greenfield Logistics Solutions will be constructing
a temporary, dorm-type community called Pelican Lodge on 200 acres at the Port. This
$70 million facility will be capable of housing 4,000 workers. GLS has indicated they
will not begin construction on this village in earnest until more of the ―potential‖
projects---like Sasol, Trunkline, G2X or Leucadia---become ―actual‖ projects. GLS is
also investigating a similar village at the Port of Vinton. Another group---First Flight
Holdings---has attained the permits and zoning changes to build a worker village, called
Moss Lake Village, on 100 acres at the West Calcasieu Airport. Moss Lake would be
designed to house up to 2,500 workers.
At the Port of Lake Charles, IFG is near completion of Phase 1 of the first
greenfield grain elevator in the U.S. in the last 25 years. The $59.5 million facility
should be finished near the end 2014 and will employ 36 people. Phase 2 would cost
about $50 million and would be built in the 2016-17 time frame.
The Golden Nugget: Jobs, Jobs, Jobs
If all the industrial construction was not good enough news, pile on top the
upcoming opening of the new, $700 million Golden Nugget Casino. This new casino
with its 740-room hotel is scheduled to open in December 2014 and employ a whopping
1,500 people. Given all the construction workers heading to Lake Charles, this casino is
opening at just the right time.
Steady to Growing at the Airpark
Two of Lake Charles’ significant employers operate out of Chennault Airpark.
AAR is the largest aircraft maintenance, repair, overhaul (MRO) organization in the U.S.
and the third largest in the world. Presently, the firm employs about 125-130 at its
Chennault location. Plans are to ramp this number up to 250 by the end of 2016.
An even bigger player at Chennault Airpark is Northrop Grumman. NG does
MR work on the military’s JSTARS and KC-10 aircraft. Presently at 730 employees, this
number should remain steady through 2015. However, in 2016 the firm enters one of its
less labor-intensive maintenance cycles and will lay off about 30 people.
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Economic Outlook Page 88
CB& I and Road Work
A final large manufacturer in the area is CB&I (formerly, Shaw) Modular
Systems. CB&I uses Westinghouse technology to manufacture equipment for the nuclear
power industry using AP1000 technology---considered the safest and most economical
technology in the industry. The company is also planning to use its modular building
technology to manufacture parts for all the petrochemical expansions occurring in
Louisiana and Texas. Its large 1,000-person workforce is expected to rise by 100-200
persons a year over 2015-16 as CB&I expands into this new market.
This region will also get a non-trivial boost from state road projects that will be
let over the next two years. DOTD puts the lettings figure for the Lake Charles MSA at
$164.3 million over 2015-16.
Absent an unforeseen spike in natural gas prices, which we do not expect, Lake
Charles will be one of the hottest areas of Louisiana over the next few years.
Monroe: Welcome to CenturyLink City
Located in the northeast corner of the state (see Map 5), the Monroe MSA is
comprised of two parishes---Ouachita and Union. Monroe is the second smallest MSA in
the state (ahead of Alexandria), with an estimated 78,900 non-farm jobs in 2014.
Until recently, this MSA had the highest concentration of employment in the
broad category called ―finance/insurance/real estate‖ (FIRE) of any MSA in the state.
Partly that was because of the 2,400-person Chase Mortgage facility, the service part of
which is now owned by Wing Span Portfolio. Another big contributor to this ranking
was the 1,200-person State Farm claims center. The latter closed its doors in 2005, and
Chase absorbed the Bank One documents depository, so FIRE’s influence in this MSA’s
economy has been reduced somewhat.
Other large employers in the region include Graphic Packaging, a paper/carton
plant that employs about 1,340 people at its three sites, and CenturyLink also plays a
key role in this MSA’s economy with its expanding 1,970-person workforce. Delphi
Lighting was a major player until it closed its 800-person headlight manufacturing
facility in June 2007.
Monroe Employment History
Figure 26 traces Monroe’s employment history from 1980 to 2014. Like Baton
Rouge this MSA was only lightly tapped by the deep recession of 1982-87. Monroe only
lost jobs for two years---1986 and 1987---and even then the decline was only 2 percent as
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Economic Outlook Page 89
compared to the 9 percent statewide job loss. The reason for the light hit is that Monroe
has almost no jobs in extraction or chemicals, which were the two industries that suffered
the most during that recession.
By 1989, Monroe had retrieved all those lost jobs and was setting new
employment records. Between 1987 and 2002, this region enjoyed a 14-year stretch of
growth, with five of those years registering 2.5 percent plus annual growth rates. (The
increase in 1990 is distorted by the addition of Union Parish to the MSA’s numbers.)
The years from 2002 through 2011 were not good ones for the Monroe MSA as
evident in Figure 26. Remarkably, Monroe did not have a growth year during this
entire 9-year period. The decline was not horrendous, but it was steady. After going
flat in 2003, the MSA has lost 4,300 jobs over 2003-11, a 5.4 % decline. (The three years
from 2005-07 were flat.) During the "Great Recession" the region lost 2,300 jobs, a
decline of 3.0 percent---tied with Lafayette as the third best performance in the state.
Fig. 26: Monroe MSA Wage & Salary Employment:
1980 - 2014
85
Losses:
State Farm
IP-Bastrop
Shaw Fabrication
Pilgrim's Pride
Accent marketing
Guide Corp
Coca Cola
80
Thousands
75
70
2003-11:
-4,300 jobs
(-5.4% )
2009-11:
-2,300
(-3.0% )
65
1990:
Union Added X
60
55
2014: +900
(1.2% )
1,300 jobs below 2003 Peak
50
80
85
90
95
00
05
10
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Economic Outlook Page 90
Consider the body blows this region took during those nine years:

The biggest hits came with the initial layoffs at, and then total closure of, the
State Farm Insurance claim office, costing the area 1,100+ jobs.

Guide Corporation reduced the workforce at its headlight plant, and then totally
shuttered the facility in 2007, at a cost of 650 jobs with an annual payroll of $53
million.

Graphic Packaging also engaged in workforce reductions.

Holsum Bakery closed its facility in Monroe, terminating 50 employees in the
process.

In 2008, International Paper closed its 550-person paper mill in nearby Bastrop.

In 2009, Shaw closed a pipe fabrication plant that had 202 employees and an $11
million annual payroll.

In 2008, Pilgrim‟s Pride closed a chicken processing plant in Union Parish that
cost the region an estimated 1,500 jobs.

In early 2010, Accent Marketing lost a major client and dismissed 340 at its call
center.

Coca Cola closed its bottling plant, laying off 85 people.
That is a remarkable list of 9 significant closures during those 9 years. It is a
wonder that the job loss was not much greater.
2012: An End to the Blood-Letting
As seen back in Figure 26, Monroe actually experienced net job growth in 2012
for the first time in nine years, and it was a healthy boost of 1,000 jobs. There were no
more major layoff announcements in that year and the region s received a shot in the arm
from a number of sources.

Foster Farms reopened the shuttered Pilgrim's Pride plant and is now back up to
1,200 employees in Union Parish. High corn prices are preventing the facility
from expanding even more.

CenturyLink continues to move like a freight train in its acquisition efforts.
Last year the company made a commitment to keep its headquarters in Monroe
through 2020 and continues to add to its Monroe workforce.
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Economic Outlook Page 91

Gardner Denver Thomas relocated operations in Wisconsin to the Monroe area
in 2010, generating 67 jobs initially with an eye towards a total workforce of
225. Instead, the company has been so successful that it has blown past that
target employment level and now employs 300.

As a sign of a longer run commitment to the region, Graphic Packaging
brought in new equipment from a mill in Colorado to increase productivity of its
workforce, which it plans to keep stable for now.

Angus Chemical invested about $100 million in its plant in Sterlington over the
past few years, including a $10.8 million investment in 2011 in a new electrical
substation and general electrical system, which helped the firm remain
productive enough to retain its 174 jobs.
Fortunately, the 2012 growth rate has continued through 2014. The MSA has
averaged 1,000 new jobs a year over the past three years. That nice performance has the
MSA only 1,300 jobs below its previous peak reached back in 2002.
Forecast for 2015-2016: CenturyLink-The One Bright Light
Our projections for this MSA are shown in Figure 27. We forecast that
employment in the Monroe MSA will be the second slowest growing MSA in the
state, in percentage terms, adding 500 jobs each year over 2015-16--a 0.5% annual
growth rate. If these forecasts are on the mark, by the end of 2016 this MSA will be
only 300 jobs away from regaining all the jobs lost since 2002.
There is a reason for this relatively weak performance compared to the MSA’s
sister MSAs on or below I-10. As we search for a source of new jobs in this region we
keep coming back to only one firm---CenturyLink. That is why our headings for this
Monroe section have not changed since last year’s LEO. This company is the one bright
light in the area. This excellent, Fortune 500 firm has committed to keeping its
headquarters in Monroe through 2020. It will also be adding 800 new jobs to its 1,970person workforce over 2014-16. A new $30 million, 250,000 square foot Technology
Center for Excellence opens in 2014. If Monroe is fortunate, this rapidly growing firm
will attract associated vendors/suppliers to the MSA.
Wing Span Portfolio took over Chase’s service center and will retain all jobs
there, which averted a critical lay off. Wing Span’s employment is expected to remain
stable over 2015-16, though the firm anticipates adding 532 employees over a 10-year
period.
There was good news from another key player in this region’s economy when
Graphics Packaging announced it was spending $41.5 million to upgrade its production
machinery. This will not create any new jobs, but it will enable the firm to retain 1,340
workers at its three sites.
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Economic Outlook Page 92
As the price of oil has remained high, interest in drilling in the Lower Smackover
in Union Parish has shown a small bump. Southwestern Energy plans to spend $178
million to drill 14 wells in this play. This is not a large employment move, but if
Southwestern Energy can prove this can be a profitable play, there may be an noticeable
increase in action over the next two years.
About $106.5 million in state road projects let over 2015-16 will inject needed
activity into the MSA. However, this number is about $10 million lower than what we
reported for the area last year.
Fig. 27: Monroe MSA Wage & Salary Employment
Forecast: 2015-16
85
2016: 300 Jobs Below 2002 Peak
80
X
Thousands
75
70
2015: +500 jobs
2016: +500 jobs
(0.5% )
(0.5% )
65
60
55
50
80
85
90
95
00
05
10
15
Alexandria: What Will Happen with Cleco?
Alexandria is the smallest of Louisiana’s eight MSAs with about 62,500 non-farm
employees in 2014. Historically, the Alexandria MSA was comprised of only one parish______________________________________________________________________________________
Economic Outlook Page 93
--Rapides. However, in 1990 Grant Parish was added to this MSA. Alexandria derives
the lowest percentage of its employment from the ―basic‖ sectors---mining and
manufacturing---of all the MSAs in the state. Located in the central part of Louisiana
(see Map 5), it has typically served as the retail/services center for the north/central part
of the state.
Alexandria also has the highest percentage of employment in the government
sector (21.8%) of all the MSAs as well---even larger than Baton Rouge (18.1%), which
is the state capital and home to two large state universities. Among the significant state
agencies in the area was the Huey P. Long Medical Center, the 400-person charity
hospital for this region---to be taken over by two of the private hospitals in the region--and Pinecrest Support and Services Center---which provides care for the mentally
disabled and employs about 1,300 people. Central State Hospital for the mentally ill
has about 300 workers at the present time. Nearby Fort Polk is the largest military
installation in the state. While not actually located in the Alexandria MSA, this huge
base has a noticeable impact on this MSA’s economy.
Procter & Gamble has a significant 1,200-person operation in this MSA, as does
a relatively new firm---Union Tank Car with 690 employees. The utility company
Cleco, with 1,244 employees, is also a major force in this MSA's economy, and Roy O.
Martin employs about 1,200 at various wood processing sites in the region. Crest
Industries---which is the umbrella firm for DisTran, CNR, Beta Engineering and Mid
State Supply---makes steel poles and substations for electric power generation and
employs almost 700.
Alexandria‟s Recent Employment History
Alexandria’s employment history is illustrated in Figure 28 . Five key points will
be noticed by the careful reader when viewing this figure. First, note that there was a
slight bump upwards in 1990. The Department of Labor revised the employment
statistics only back to that year to take into account the addition of Grant Parish to this
MSA.
Secondly, note that this MSA enjoyed an almost recession-free history until
2001. Except for a mild decline in 1982, its employment track had basically been a line
moving constantly upward for the last two decades of the 20th century.
Even the post-9/11 national recession in 2001 only mildly impacted the
Alexandria MSA, causing a meager loss of only 200 jobs (-0.3 percent). This means the
Alexandria MSA was the least impacted of all the state’s eight MSAs---not a surprising
finding given the low manufacturing base and the government-orientation of the region.
Note thirdly that there is a distinct kink in the graph starting in 1992. Two
factors contributed to this nice boost in Alexandria’s growth rate. The first was a
seemingly negative event---the closure of England Air Force Base. Civic and
governmental leaders turned this economic lemon into lemonade by gaining control of
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Economic Outlook Page 94
the base assets and turning it into an industrial park/retirement village. England
Industrial Airpark is now almost totally reoccupied. Several businesses have moved to
the site, and the regional airport has been relocated there. Too, during this period I-49
was being constructed through the heart of the city, adding an unusual injection of
construction jobs to the economy. There was a slight slowdown in 1996-97 when one of
England’s newest and largest tenants---J.B. Hunt Trucking---shut down their operation
there.
Fig. 28: Alexandria MSA Non-Farm Employment
1980-2014
70
65
Thousands
60
55
IP closed
UT Layoffs
Dresser Layoffs
LA Hardwood halted
Star-Tec closed
2009-14:
-4,600
(-6.9% )
2014: -200 jobs
2001:
Recession
-200 jobs
(-0.3% )
50
45
40
80
85
90
95
00
05
10
2005-08: Great Growth Years
Fourthly, note that the recovery from the 2001 recession was initially lackluster at
best. Employment was basically flat from 2002 through 2004. However, as seen in
Figure 28 the next four years were very good ones for this MSA. Employment jumped
by 6,100 or a strong 2.5 percent annually. This was perhaps the best performance in the
state over that 4-year time frame.
During this rapid expansion phase there was (1) a doubling of the size of the
federal prison at Pollock, (2) significant capital expenditures at England Airpark, (3)
$132 million on the construction phase of Union Tank Car (UTC), (4) UTC began a
hiring process that resulted in 670 workers at its new plant, (5) the huge $1 billion+
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Economic Outlook Page 95
Cleco Rodemacher plant was under construction at the time, creating about 1,700
construction jobs, and (6) a new $60 million MARTCO plant was constructed in the
southern part of the MSA.
On the outer edges of the MSA, there was a $100 million addition to the Paragon
Casino in nearby Avoyelles Parish, and a large amount of construction spending took
place at Fort Polk. While these two projects are outside of the MSA’s borders, they
created extra earnings which were often spent in Alexandria’s retail and service
establishments. Offsetting all this good news was the closure of Parta Systems, a 110person pharmaceutical parts manufacturing plant.
2009-14: A Pounding from the Great Recession & State Government
The fifth lesson from Figure 28 is the continuous drop in employment over the
past six years. Since 2008, this MSA has lost 4,600 jobs---a 6.9% decline.
Great Recession Effects. The Great Recession was partly the culprit.
Alexandria's employment took quite a hit over 2009-10, losing 3,500 jobs or a 5.6 percent
decline (see Table 8). Only Lake Charles at 6.3% had a worse record during the Great
Recession.
There were several factors behind this drop. The attraction of a large, highpaying, durable goods manufacturer like Union Tank Car is great for an area. However,
when the national economy goes south, durable goods manufacturers get hit the hardest.
After reaching a peak employment of 670 in early 2008, orders for UTC tank cars
dropped so much that the firm reduced its employment to 270. Eight to nine companies
that lease cars from UTC went bankrupt and returned their cars. Plus, demand for new
cars was down as always happens when you have a recession as bad as the Great
Recession. For example, in 2006 about 60,000 rail cars were sitting idle; by spring 2009
this number was up to 540,000.
Secondly, the region’s lumber industry came under attack due to the weak
national housing market. Specifically, Louisiana Hardwood in Lemoyen halted its
second shift in 2009, and International Paper closed its container board plant in late
2009, laying off 230 people. Thirdly, the huge $1 billion+ Cleco Rodemacher plant
construction project was finished in 2009, resulting in the loss of those 1,700 construction
jobs. Also, on a lesser scale, Dresser Industries began moving from a manufacturing
orientation towards assembly, and reduced its workforce by 75 in early 2010. Finally,
Star-Tech lost a major customer and laid off 300 people.
State/Local government layoffs. What is odd about this region’s employment
since the end of the Great Recession is that its employment has continued to trend
downwards, though at a much slower rate. In the last four years, this MSA has lost
another 1,000 jobs despite the fact that most of its key manufacturers have been in an
expansion mode and the Jena Indian Tribe opened a 46,000 square foot, class II casino in
February that employs 300 people.
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Economic Outlook Page 96
A different culprit was responsible for this decline. We mentioned earlier that this
region has a higher percentage of employment in the government sector than any other
MSA in the state. More often than not that lends an extra measure of stability to a region,
but not when state and local governments are having budgetary problems. Since 2010,
state government employment in the MSA is down 1,200 jobs and local government
has declined by 300 jobs.
Forecast for 2015-16: Rising Fear about Cleco
Figure 29 contains our forecasts for the Alexandria MSA for the next two years.
We are projecting that this MSA will add 300 new jobs in 2015 (0.5%) and 400 in
2016 (0.6%). This growth rate will place Alexandria in 8th place among the eight MSAs
in the state. It will, however, reverse the downward spiral the MSA has been in since
2009.
Fig. 29: Alexandria MSA Non-Farm Employment
Forecast: 2015-16
70
2015: +300 jobs (0.5% )
2016: +400 jobs (0.6% )
65
Thousands
60
55
50
X Grant Parish added
45
40
80
85
90
95
00
05
10
15
Growth from Customs, Crest, and PaperWorks
Part of this projected reversal in trend comes from four sources. First, the new
Immigration and Customs Transfer site opened at England Airpark in the summer of
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Economic Outlook Page 97
2014. This facility that serves as the transportation hub for moving detainees will
employ 150.
Secondly, a real, continuing success story for the Alexandria MSA has been Crest
Industries. Crest is the umbrella company for Dis-Tran, CNR, Beta Engineering, and
Mid-State Supply. The main focus of Crest is on making steel poles and substations in
the electricity generation sector. The firm is building a new $2.3 million headquarters
building in Pineville that will add 90 jobs to its staff. The firm has grown from 350
employees in 2008 to over 600 and will likely add 100 jobs in 2015.
A new firm to the MSA is PaperWorks, which moved its carton finishing
operations to Alexandria from New York. The firm will spend $1.9 million on
renovations in the area and add 43 jobs to the community.
Finally, The Hayes Companies is spending $3 million to expand its
manufacturing plant in Pineville, a move that will create 75 new jobs. The work that
Hayes does supports companies such as Union Tank Car, OneSubsea, and GE Energy.
The new plant should be completed by the end of 2014.
Stability among Bigger Players
For the most part, this MSA can look to some of its bigger players for stability
over the next two years. Proctor & Gamble‟s large plant employs about 1,200 direct
and contract employees, a number that should remain fairly constant through 2016.
Union Tank Car is now running two production shifts and is fully booked with orders
through mid-2015. The firm has no major capital expenditures planned any time soon
and expects employment to remain in the 690 range.
There are three Roy O. Martin (Martco) plants in the area that employ 1,200 in
total. There may be an addition of 10-15 employees over or forecast period, but in
general employment should be pretty constant. The same sort of stability is expected at
Dresser Industries 350-person site in Alexandria. There is even stability is road
construction activity in this MSA. There is $60 million in state road projects planned
for the Alexandria MSA over 2015-16, a figure that is little changed from last year.
A bond issue for a $23 million makeover of the Rapides Parish Coliseum was
passed in 2013. There have been some technical issues involving building codes and
negotiations between the City and Parish over the value of a parking lot. Those issues
area expected to be worked out in time for a 2015 construction start that will take about
18 months to complete. Work should start during our forecast period on Phase 1 of a new
$22.8 million community technical college in the central business district in Alexandria.
Big Potentials: Sundrop and Cool planet
Citizens of Alexandria are watching with interest the deliberations of two firms
that have to make decisions on significant investments in the region’s economy. Cool
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Economic Outlook Page 98
Planet Energy is considering building three biomass-to-gasoline refineries in northnorth-central Louisiana. One of the plants would be at the Port of Alexandria. Indeed the
firm began site prep at the Port in July 2014. However, it is still testing its techniques
and likely would not begin construction until late 2015 or early 2016. Phase I of their
plans would be for a $58 million site at the Port with a possible Phase II that would be
two to three times larger. In addition to fuel the firm will also make CoolTerra, which is
a bio-char that when put in the ground enables a farmer’s land to retain water so that 40%
less water is needed via irrigation. Cool Planet garnered $100 million in Series D
financing for its project, which is a positive step toward a ―go‖ decision on this project.
A second biomass firm is considering a major investment in the area is Sundrop
Fuels. Sundrop will combine forest waste with hydrogen to produce fuel. The company
has secured land and done some site preparation. It is presently in front end engineering
and design work that will probably take place through our forecast period before a final
decision is made.
The Public Side: What about Hospital Employment?
Total hospital employment in the region will be interesting to watch because of
the closure of the Huey P. Long Charity Hospital on June 30, 2014 due to the move by
the Jindal Administration to privatize the charity hospital system. Christus St. Frances
Cabrini hospital is to handle psychiatric and urgent care, and inpatient care will be shared
with Rapides Regional Medical Center. RRMC began accepting patients in December
2013. Outpatient care will be provided by two urgent care clinics---one in Pineville and
two in Alexandria. Whether all of the 400+ employees at the charity hospital will be
fully absorbed into the private care facilities remains to be seen.
Another large employer in the area is Pinecrest Hospital. With 1,300 employees
now it is the only state center providing care for the developmentally disabled in
Louisiana.
An important influence on this region’s economy is Camp Beauregard. Camp
Beauregard is 12,500 acres of land in the Pineville area devoted to training for the
Louisiana Army National Guard. There are 819 active Guard, civilians, and state military
personnel located at this site with an annual payroll of $65.3 million. Defense cutbacks
will likely lead to a loss of 40-50 people over 2015-16.
The Big Worry: What Will Happen at Cleco?
The Alexandria community was shaken in late June by word that a ―receipt of
indications of interest‖ had been received by Cleco from parties interested in purchasing
the firm. In response Cleco reported it had hired Goldman Sachs & Company and Tudor,
Pickering, Holt & Company as its financial advisors and Locke Lord LLP as its legal
advisor to review and evaluate any proposals. No definitive timetable to complete a
review of the proposals. At this writing, potential buyers have been narrowed down to
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Economic Outlook Page 99
Iberdrola (Spain’s largest utility company) and Macquarie (an Australian investment
bank). Cleco has indicated there can be no assurance that the review being undertaken
will result in a merger or business combination or a path different from the Company’s
current strategic plan.
What is so unsettling to people in the Alexandria area is, of course, that this is one
of the area’s largest employers at 1,200 employees. One reason a merger or business
combination occurs is because typically significant efficiencies can be gained by
eliminating overhead at the firm being purchased. It would not be out of the question for
this MSA to lose out on two-three years of employment growth if the worst case scenario
occurs.
THE OUTLOOK FOR THE RURAL PARISHES: 2015-16
Back in Map 5 we illustrated where the eight MSAs are located in Louisiana.
With the recent expansions to three of our MSAs, there are now 34 of the state’s 64
parishes located in these eight MSAs. The remaining 30 parishes are designated as
―rural‖. With few exceptions, most of these rural parishes have a distinctly agricultural
economic base. Among the exceptions are Tangipahoa, Lincoln, and Natchitoches
Parishes---which are homes to relatively large universities---the coastal parish of St.
Mary---which has a significant attachment to the oil and gas extraction industry---and
Vernon Parish on the central Texas border which is the home parish for Fort Polk, a very
large military base.
Less than one-fifth of the state’s employment exists in these 30 parishes. Figure
30 tracks employment trends since 1990 in these rural parishes and provides forecasts for
2015-16. Readers should note that the data in Figure 30 still include St. James,
Vermillion, Iberia, Acadia, and Webster Parishes. Recall that employment data for these--now MSA parishes---will not be included in their respective parishes until the revised
2015 data are released.
Recession Impact on Rural Parishes Hard---Until Great Recession
Note in Figure 30 is how sensitive employment in this rural area has been to
national recessions. In the early 1990s’ recession rural employment fell for three
straight years. Rural parishes lost 10,600 jobs, a drop of 3.3 percent. Then in the post9/11 recession, rural region employment fell hard for two years---a loss of 15,300 jobs or
4.3 percent.
In both cases the percentage job loss in the rural areas was worse than in the
nation. However, during the Great Recession Louisiana’s rural parishes lost only 2.7% of
its jobs compared to 6.1% compared to the nation as a whole. One sector in the rural
areas did get hammered during 2009-10. Bursting of the housing bubble led to layoffs
______________________________________________________________________________________
Economic Outlook Page 100
and closing in several of Louisiana’s large wood products firms. These firms tend to be
concentrated in rural parishes. For example:

Weyerhaeuser Corporation laid off 185 at its facilities in Lincoln and Winn
Parishes.

Weyerhaeuser Corporation laid off 39 at its Bienville Parish site.

Hunt Forest Products temporarily idled its Natalbany facility in Tangipahoa
Parish.

Boise Cascade indefinitely curtailed 130 workers at its plywood veneer plant in
Allen Parish.
Fig. 30: Non-Farm Employment - Rural Parishes
1990-2014: Actual; 2015-16: Forecast
370
2015: 700 Jobs (0.2% )
2016: 700 Jobs (0.2% )
360
Thousands
350
340
2009-10:
-10,000 Jobs
(-2.7% )
330
320
310
1990
1995
2000
2005
2010
2015
Bad news in the wood products area was partially offset by good news in those
parishes with ties to the extraction industry. Red River Parish had an especially good
2009-10 due to flourishing drilling activity in the Haynesville Shale in the northwestern
part of the state. In the coastal parishes, offshore drilling in the Gulf was strong until the
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Economic Outlook Page 101
BP spill, then large sums of money came flowing into these parishes for cleanup work or
in claims payments made to businesses and individuals. This was enough to rescue rural
areas from their typical routine of experiencing losses greater than the nation.
Modest Rebound from the Great Recession
Rural Louisiana had a modest, but short lived, rebound from the Great Recession.
As seen in Figure 30, the recovery started out slowly, adding 1,000 jobs in 2011,
followed by an even better performance of 3,700 jobs (+1%) in 2012. Then the rural
areas went into a slide, losing 10,700 jobs over 2013-14, a decline of about 5%. By the
end of 2014, we expect the rural area to be 16,000 jobs below its previous
employment peak back in 2008.
Rural Forecast for 2015-16: Cluttered by Movement to Urban
Note in Figure 30 that we are projecting rural employment will rise by 2,500
jobs in 2015 (+0.7%) and by another 700 (+0.2%) in 2016. It is important to note that
comparisons of our forecast this year with what is actually reported next year will be
cluttered because five parishes that are now classified as ―rural‖ will become ―urban‖ or
MSA parishes starting next year.
Perhaps the best approach is to discuss what we see happening in those parishes
that will remain rural next year. While there are one or two nice projects landed for the
rural parishes, the list is not all that long and thus, our forecasts for the region are not
very strong. Here are major projects for this region:

One of the larger projects was secured for Bogalusa. General Dynamics opened
a call center that handles government healthcare calls. GD opened its facility in
the summer of 2013 and now employs 600 people. The company is expected to
add another 400-500 employees over 2015-16.

Gulf Coast Spinning is spending $130 million on a new cotton spinning facility
at the Bunkie Industrial Park. Over 300 jobs will be created at the plant, paying
an average annual wage of $30,100.

In Urania, German Pellets GmbH is constructing the world’s largest wood
pellets manufacturing plant, capable of producing 1.1 million tons of pellets a
year. The Louisiana Public Facilities Authority approved $300 million in bonds
for the project in 2012 and construction was started in summer 2014. Between
125 and 150 people will be employed at this plant in LaSalle Parish.

Universal Plant Services recently completed its $3.9 million plant in Jena in
LaSalle Parish. The firm will hire 95 employees who will work on welding,
fabrication, and equipment overhaul and repair.
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Economic Outlook Page 102

Tangipahoa Parish was the fortunate recipient of a new $15 million galvanized
protective coatings plant. Crest Industries will use the facility to prep poles and
other equipment for electric power plants. The plant will be complete in 2015 and
employ 70 people.

A real success story for Ruston in Lincoln Parish has been Mortgage
Contracting Services, a firm that protects and preserves vacant properties for
mortgage companies. MCS is doubling the size of their facility to 200,000 square
feet and adding 90 new jobs. The expansion should be completed in 2015.

The construction industry in these rural areas will get a boost from (1) $396.5
million in state road projects that will be let over 2015-16 (a figure larger than
any single MSA in the state) and (2) a $56 million air pollution control project at
Cabot Corporation in both Franklin and Ville Platte.
There are two other entities that will need to be monitored carefully because of
the number of jobs involved. One could be very positive; the other could be calamitous.
From a positive standpoint we are watching MARTCO which has three plants
employing 1,250 people in rural areas of Louisiana. MARTCO produces lumber. During
the recent housing market collapse, many lumber yards were dismantled and moved
abroad. For example, in 2005-06 the particle board capacity in the U.S. was 44 billion
board feet. Today it is down to 26-27 billion board feet. If housing starts in the U.S. start
moving above 1.5 million a year, the industry would not have the capacity to respond
with more lumber. In that event, we would expect MARTCO to make a significant
investment in a new yard and hire even more people.
At the other end of the spectrum is Louisiana’s largest single employer---Fort
Polk in Vernon Parish. The Supplemental Programmatic Environmental Assessment for
the Army 2020 Force Structure Realignment (there really is a document with a title that
long) is proposing that the troop force at the base be reduced by 6,500 from its present
level of 10,836---a stunning 60% reduction. It would naturally follow that a significant
reduction would also occur in the civilian workforce at the base. This would be a
massive blow for Vernon parish, and it would certainly have spillover effects on the
Alexandria MSA which is the retail/service center for the workforce at the base. A
decision is expected in 2015-III, with any cuts spread over 2016-20. The full cut of 6,500
may be unlikely because (1) that would make Fort Polk untenable as an Army base, and
(2) with the Fort’s massive land mass for training (unavailable at other bases), the Army
is unlikely totally close the facility. Even then, a cut of 3,000-4,000 would be possible--still a huge hit to the region.
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Economic Outlook Page 103
THE OUTLOOK FOR THE STATE: 2015-16
In the pages above we have reviewed the prospects for each of Louisiana’s eight
MSAs and its rural parishes for 2015-16. Figure 31 illustrates the results of summing up
these individual are forecasts to get the outlook for the state as a whole. We are
forecasting very robust progress for the state over the next two years, adding 34,100
jobs in 2015 and 32,600 jobs in 2016. As seen in the chart, Louisiana began setting
employment records in January 2013 and has been steadily growing ever since. Equally
exciting is a new record on the horizon. If our forecasts are near the mark, sometime
in 2015 Louisiana will have more than 2,000,000 non-farm employees for the first
time in its history.
Fig. 31: Louisiana Non-Farm Employment
Forecast: 2015-16
2,100
2,000
Over 2,000,000 for first time
X
Thousands
1,900
1,800
1,700
1,600
2015: +34,100 jobs (1.7% )
2016: +32,600 jobs (1.6% )
1,500
January 2013:
New Record Set
1,400
80
85
90
95
00
05
10
15
It would be nice if this vigorous growth was expected to be spread evenly across
the state. However, the careful reader will note that growth in the state will be clearly
bifurcated. If a line was drawn along I-10 straight across the state, the really dynamic
growth will be experienced on and beneath that line.
Barring some special
announcements soon, expansion in the central and northern regions of Louisiana will be
modest at best.
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Economic Outlook Page 104