OPINION: LOUISIANA ECONOMIC SITUATION NOVEMBER 2022

Written By Vance Finn - Chief Economist @ The Pelican Institute for Public Policy

Key Point: Louisiana’s labor market looks okay on the surface, but the labor forceis 16,613 (-0.8%) below the COVID-related shutdown in February 2020, and private sector employment is 35,900 (-2.3%) below then.

Labor Market: A job is the best path to prosperity as work brings dignity, hope, and purpose to people through the life-long benefits of earning a living, gaining skills, and building social capital. The table below shows Louisiana’s labor market over time according to the U.S. business cycle until the latest data for October 2022 by the U.S. Bureau of Labor Statistics.

The payroll survey shows that net total nonfarm jobs in the state decreased by 4,200 jobs last month, bringing this to 60,600 jobs below the pre-shutdown level in February 2020. Private sector employment was down by 3,000 jobs, and government employment declined by 1,200 jobs last month. Compared with a year ago, total employment was up by 52,100 (+2.8%), with the private sector adding 52,700 jobs (+3.4%) and the government cutting 600 jobs (-0.2%). The household survey finds that the civilian labor force declined by 6,035 last month and is down 16,613 since February 2020, which results in the labor force participation rate of 58.3% being 0.3-percent points lower than it was in February 2020 but well below June 2009 at the trough of the Great Recession. The employment-population ratio is one percentage point above where it was in February 2020, and the private sector employs 38,900 (-2.3%) fewer people than then. 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 rather than this weak indicator shows that Louisianans still face challenges, especially compared with neighboring states.

Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently providedthe real (inflation-adjusted) gross domestic product (GDP) for Louisiana and other states. The following table shows how U.S. and Louisiana economies performed since 2020. The steep declines were during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered the most. The decline in real GDP annualized growth in Q2:2022 of 3% was the 5th worst in the nation. The BEA also reported that personal income in Louisiana grew at an annualized pace of 5.8% (19th best) in Q2:2022 (tied +5.8% U.S. average).

Bottom Line: Louisianans lost jobs in October and continue to feel the effects of the shutdowns in 2020, as many policies are too restrictive to allow more economic growth and prosperity with well-paid jobs. The Fraser Institute recently ranked Louisiana 20th in economic freedom based on 2020 data for government spending, taxes, and labor market regulation. And the Tax Foundation recently ranked the Pelican State as having the 12th worst business tax climate. While the state has improved its tax code recently, and lower taxes may happen soon from an expected budget surplus, this lack of economic freedom and poor business tax climate is contributing to a net outmigration of Louisianans to other states over time, which is a drain on the state’s economic potential now and in the future. State and local policymakers should work to reverse this trend by passing pro-growth policies.

Recommendations: In 2023, the Louisiana Legislature can help grow Louisiana’s economy by:

• Passing pro-growth policies that limit government spending, reform and flatten taxes, expand school choice, improve workforce development, remove barriers to work, and reform safety nets.

• Improving the state’s economic situation will come from increasing economic freedom and increasing individual liberty, which will help Louisianans better resist D.C.’s overreach—which has resulted in stagflation—and flourish more for generations to come.