Louisiana Economic Situation—April 2023

Louisiana Economic Situation—April 2023

 

Key Point: Louisiana’s economy has many weaknesses primarily because of poor policies hindering prosperity across the state, which is why there’s a need for the Pelican Institute’s “Comeback Agenda.”

Louisiana’s Labor Market: Table 1 shows Louisiana’s labor market over time through the latest data for March 2023 from the U.S. Bureau of Labor Statistics.

Table 1: Labor Market Indicators in Louisiana

June 2009 February 2020 April 2020 March 2023
Labor force participation rate 61.2% 58.3% 55.5% 59.6%
Employment-population ratio 56.9% 55.5% 48.0% 57.6%
Unemployment rate (U3) 7.0% 5.2% 13.5% 3.3%
Total nonfarm employment 1.90M 1.99M 1.71M 1.95M
Private sector employment 1.53M 1.66M 1.39M 1.64M

Data compare the following: 1) June 2009—Dated trough of that U.S. recession, 2) February 2020—Dated peak of the last U.S. expansion, 3) April 2020—Dated trough of the last U.S. recession, and 4) March 2023—Latest data available.

The establishment survey shows that net total nonfarm jobs in the state increased by 4,400 jobs last month (+0.2%), bringing total jobs to 42,700 jobs below the pre-shutdown level in February 2020. Private sector employment was up by 4,800 jobs (+0.3%) and government employment declined by 400 jobs (-0.1%) last month. Compared with a year ago, total employment was up by 40,200 jobs (+2.1%), with the private sector adding 31,700 jobs (+2.0%) and the government adding 4,100 jobs (+1.3%).

The household survey finds that the working-age population declined by another 1,045 people (-0.03%) last month, down 11,789 people (-0.3%) over the last year, and down 32,292 people (-0.9%) since February 2020. But the civilian labor force rose by 15,246 people (+0.7%) last month, 23,150 people (+1.1%) over last year, and 42,381 people (+2.0%) since February 2020. These figures result in a labor force participation rate of 59.6%, which is up from 58.3% since pre-shutdown but well below the 61.2% rate in June 2009 at the trough of the Great Recession. While the unemployment rate of 3.3% is substantially lower than the 5.2% rate in February 2020, a broader look at Louisiana’s labor market shows that Louisianans still face challenges (see Figure 1), as the population continues to decline and comparatively with neighboring states based on several measures.

Figure 1: Employment Growth Comparison Among States Over Last Year

Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real (inflation-adjusted) gross domestic product (GDP) in Q4:2023 for Louisiana and other states in Figure 2.

Figure 2: Real GDP Growth by State in Q4:2023

Table 2 shows how U.S. and Louisiana economies performed since 2020. The steep declines during the shutdowns in 2020 were in response to the COVID-19 pandemic, which was when the labor market suffered most. The increase in real GDP of +2.2% in Q4:2022 ranked 26th in the country, resulting in an annual decline in economic output by -1.8% in 2022 which was the second worst in the country.

Table 2: Economic Growth Comparison Between U.S. and Louisiana

2020 2021 2022 Q1:2022 Q2:2022 Q3:2022 Q4:2022
U.S. real GDP annual growth rate -2.8% +5.9% +2.1% -1.6% -0.6% +3.2% +2.6%
U.S. real private GDP growth -3.9% +7.2% +2.6% -1.5% -0.5% +3.1% +2.3%
Louisiana real GDP growth -7.9% +1.3% -1.8% -8.9% -3.0% +2.5% +2.2%
Louisiana private real GDP growth -8.9% +1.5% -1.6% -7.9% -3.2% +2.8% +2.2%

 

The BEA also reported that personal income in Louisiana grew at an annualized pace of +6.0% (ranked 32nd) in Q4:2022 (below +7.4% U.S. average). This resulted in personal income growth of 0.0% in 2022, ranking 50th of the states. Personal income per person in Louisiana increased by 0.8% to $54,622 last year, which ranked 42nd in the country and the increase was well below inflation.

Bottom Line: Louisianans gained jobs in March, but those jobs are not paying enough to beat inflation or help expand investment in a stagnant economy, resulting in a costly stagflationary situation. Institutions matter to human flourishing, but they are too weak in Louisiana according multiple measures. The state has improved its tax code recently and lower taxes may happen soon, but there’s a once-in-a-generation opportunity to ensure prosperity. The combination of spending restraint, not busting the spending cap, paying down debt, and putting money in the Rainy Day Fund for future tax reforms and to hit the triggers for tax relief now are essential. These steps would help improve the state’s poor business tax climate, help curb the net outmigration of Louisianans, and help mitigate the 19.6% poverty rate that ranks second highest in the country.

How could lawmakers do this? Refer to the Pelican Institute’s “Comeback Agenda” for policy recommendations related to the state’s budget and taxes, K-12 education, public safety, social safety nets and workforce development, technology and innovation, and reducing regulatory barriers.

 

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