The good, bad and ugly of the Q1 2022 Louisiana Economic Activity Forecast

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The gist: Louisiana’s economy is still slouching its way through a Covid recovery, with growth slowing and workers staying on the sidelines, according to the latest quarterly Louisiana Economic Activity Forecast produced by UL’s Acadiana Business Economist Endowed Chair Gary Wagner. Lafayette won’t reach its 2014 employment peak anytime soon.

“The economic outlook for Louisiana is being downgraded, with growth expected to slow in the second half of 2022… At the current pace of the economic recovery, Louisiana is now expected to regain all COVID-related job losses in the first quarter of 2023.”

Gary Wagner

The Good

Louisiana is expected to recover all COVID job losses in the first quarter of 2023. The state ranks 47th in the nation in terms of regaining COVID-related job losses, though that’s up from 50th. Most sectors in the state outside of oil and gas extraction and manufacturing are now experiencing growth.

The Bad

Growth is slowing nationally and in Louisiana. The outlook for the U.S. economy has weakened for the third consecutive quarter, with inflation being the greatest threat. Louisiana’s growth is expected to slow in the second half of 2022.

U.S. spending on durable goods fell in November and December. The largest reductions occurred in spending on home furnishings, appliances and communications equipment. This raises the specter that the stimulus-powered bubble in retail spending may be starting to pop.

Louisiana’s unemployment rate declined more than projected, but that’s largely due to people dropping out of the labor force. Labor force participation rate is the amount of working-age people either employed or looking for work relative to the amount of people who have dropped out of the workforce or stopped looking for work. Nationally, the labor force participation rate is 62.2% and has been steadily rising since June 2021. In Louisiana, this rate is down to 57.7% and has been falling steadily since August 2020. Louisiana’s rate is at its lowest level since May 1977.

The Ugly

Incomes are falling as inflation rises. Inflation-adjusted after-tax personal income has now declined nationally for five consecutive months through December 2021. At the same time, inflation’s on the rise everywhere. The last time personal income declined this many months in a row was during the first half of 1974, which was the era of stagflation, where inflation and unemployment rose simultaneously in the midst of a severe economic downturn.

Lafayette’s “recovery” isn’t actually recovering. According to Wagner’s forecasts, the total number of jobs in the Lafayette metro area is projected to still be 7,000 less by the end of this year compared with the beginning of 2020. And at the beginning of 2020, the total number of jobs was roughly 15,000 less than it was at the peak in 2014. So our area’s “recovery” is on track to remain down more than 20,000 jobs versus where we were less than a decade ago.