Louisiana’s economic performance continues to lag behind its regional peers, with recent data highlighting persistent challenges in growth and employment. 

According to theBureau of Economic Analysis (BEA), Louisiana’s real GDP grew by just 2.1% in Q3 2024, ranking 40th nationally. This underwhelming performance contrasts sharply with Arkansas, which led the nation with a 6.9% increase, and Texas, which posted a robust 4.2% growth. 

Additionally, Louisiana’s unemployment rate stood at 4.3% in November 2024, higher than the national average of 4.2% and neighboring states like Arkansas (3.3%) and Texas (4.2%), as reported by the Bureau of Labor Statistics (BLS).

Regulatory Burdens: A Need for Transparency and Accountability

A significant factor contributing to Louisiana’s economic stagnation is its extensive regulatory environment. According to the Mercatus Center, Louisiana’s Administrative Code contains 180,858 restrictions, making it the 10th most regulated state in the nation. These restrictions create significant compliance costs for businesses, discouraging investment and innovation across various sectors.

Interestingly, while Texas has more total regulations than Louisiana, its business-friendly policies and efficient implementation reduce the overall burden. This disparity highlights that the number of regulations alone does not fully capture their economic impact. The cost of compliance often matters more than the sheer number of rules. For this reason, implementing a regulatory budget in Louisiana would provide greater transparency by quantifying both the volume and cost of regulations. A regulatory budget ensures that policymakers can cut not just the number of restrictions but also the economic drag they impose, helping to reduce both direct compliance costs and unintended barriers to growth.

To understand part of the regulatory burden on Louisianans between 1997 and 2015, growth in federal regulations contributed to an additional 224,837 residents living in poverty in Louisiana, an average of 1,794 jobs lost annually, and a 7.35% increase in consumer prices. These burdens disproportionately harm low-income households and small businesses, exacerbating inequality and stifling entrepreneurship. Texas’s approach of combining its high regulatory count with robust efforts to streamline and modernize rule enforcement has created a pro-growth environment that offsets the numeric burden. Louisiana must adopt a similar focus on cost-effective governance to remain competitive.

Overreliance on Oil and Gas

Louisiana’s dependence on oil and gas compounds its economic vulnerabilities. While this industry has been a cornerstone of the state’s economy, global price fluctuations create instability, affecting jobs and state revenues. In Q3 2024, the energy sector’s negative economic contribution reduced Louisiana’s overall GDP growth. Texas offers a roadmap for balancing energy reliance with diversification. Louisiana’s infrastructure and geographic advantages provide opportunities to develop many other industries, especially the technology sector, but achieving this diversification requires regulatory reform to lower barriers for emerging sectors.

Labor Market Inefficiencies

The labor market in Louisiana mirrors its broader economic challenges. Despite some job growth in retail and hospitality, these gains remain concentrated in low-wage sectors that contribute little to long-term prosperity. High-wage industries such as advanced manufacturing and professional services have shown limited expansion. In contrast, Arkansas and Texas have made significant strides in aligning workforce development programs with industry needs, creating pipelines for skilled workers in sectors like manufacturing, logistics, and technology. To strengthen its labor market, Louisiana must prioritize education and vocational training tailored to high-demand fields.

A Free-Market Strategy for Growth

Louisiana must embrace free-market principles to reverse its economic stagnation. Reviewing and reducing its 180,858 regulatory restrictions is critical, but the focus must extend beyond quantity to include the overall cost of compliance. A regulatory budget would ensure that the state reduces unnecessary restrictions and cuts the economic burdens they impose on businesses. Regular reviews of outdated regulations would further help align the state’s policies with modern economic needs.

Spending less and tax reform are crucial components of this strategy. High tax burdens deter investment and limit disposable income for families. Simplifying and lowering tax rates passed last year will attract businesses and provide relief to residents. Texas and Arkansas have demonstrated how competitive tax policies can drive growth, and Louisiana has the opportunity to lead.

Finally, Louisiana should remove obstacles to diversifying its economy. Reducing its dependence on oil and gas by encouraging growth in other sectors will provide a more stable economic base. Removing regulatory hurdles in these sectors will enable them to flourish, attracting investment and creating high-paying jobs.

Building a Resilient Future

Louisiana’s challenges are significant, but they are not insurmountable. By focusing on free-market reforms—reducing regulatory costs, diversifying its economy, and aligning workforce development with industry needs—the state can unlock its potential and secure a prosperous future. Policymakers must prioritize economic freedom and efficiency to create an environment where businesses thrive and families prosper. With bold action, Louisiana can move from economic stagnation to regional leadership, setting an example for growth and resilience.