LEDA's new Economic Performance Index is an accurate analysis of how we're doing - and how that performance compares to past years.
Even though the staff at LEDA makes more than 50 presentations in a year, people around town always stop me wanting to know the latest news on the economy. With 30 minutes at a lunch presentation, it's easy to paint the complete picture with real-world anecdotes and time to explain the story behind the numbers. But when we're both headed to the next meeting, the story is more difficult to quickly sum up. Until now, there hasn't been a simple response to the question, "How's the local economy?" Enter LEDA's Economic Performance Index.
LEDA's new Economic Performance Index is an accurate analysis of how we're doing - and how that performance compares to past years.
Even though the staff at LEDA makes more than 50 presentations in a year, people around town always stop me wanting to know the latest news on the economy. With 30 minutes at a lunch presentation, it's easy to paint the complete picture with real-world anecdotes and time to explain the story behind the numbers. But when we're both headed to the next meeting, the story is more difficult to quickly sum up. Until now, there hasn't been a simple response to the question, "How's the local economy?" Enter LEDA's Economic Performance Index.
The EPI tracks the pulse of the local economy. It examines 15 of the most significant local economic indicators and a single score is calculated that represents the current state of the economy. The EPI is the most accurate reflection of the economy we can produce because it removes inflation and seasonality to present the economy on a level playing field - meaning movement in the index is based on actual changes in the economy. This also allows for us to historically compare today's score to the past.
Rig counts are one example of what you'll find in the EPI, which will be printed in full in the May 30 issue of ABiz. Rig counts are considered a lagging indicator because changes are seen three to six months after the overall economy shows signs of adjustment. Decisions about rigs are made in response to economic conditions, government policies and other variables such as prices. In a business where one rig may represent thousands of jobs and tens, if not hundreds, of millions of dollars in capital investment, rig counts are a great indicator to follow.
Many people may not realize that the decline in Louisiana rig counts last year was the result of lower counts in North Louisiana, not a decline in offshore activity. Since the offshore rig count reached its lowest point in recent history, 16 rigs, in June 2010, Louisiana offshore rigs have more than doubled to 40. North Louisiana saw a loss of 79 rigs from April 2011 to April 2012.
Although the slump in North Louisiana rigs might raise eyebrows, recent discoveries in the Tuscaloosa Marine Shale, which spans central and southeast Louisiana and parts of Mississippi, will surely increase the onshore rig count. Now that horizontal drilling techniques have been refined in places like Haynesville, companies can tap into the nearly 7 billion barrel TMS reservoir. The sharp increase in leases filed in 2011 in the TMS area points to increased future activity. All of this is great news for Acadiana given the region's heavy concentration of oil and gas service companies that provide assistance to both offshore and onshore drilling activity. However, activity for both the Haynesville and TMS shales will depend on a rise in natural gas prices, which are at a decade-low of approximately $2/MMBtu. With low prices, the TMS is more appealing because it is a wet gas field that can yield more profitability than a drier gas field like the Haynesville Shale. Onshore activity coupled with the gradual climb in offshore rig counts since the drilling moratorium also leave room for much optimism. There are other factors that could bring a turnaround in 2012: Average crude oil price per barrel has been the highest in history, and many oil and gas companies have reported record earnings. This should translate into more exploration and development by those companies.
Other indicators featured in the EPI include new residential building permits, Louisiana drilling permits, local stock index, weekly manufacturing hours, initial unemployment claims, retail sales, hotel/motel receipts, average sales price of a single-family home, non-farm employment, unemployment rate, bankruptcies and unemployment duration.
What is Lafayette's current EPI score? To find out, you'll have to join me May 17 for my presentation at ABiz's 2012 State of the Lafayette Economy Luncheon. We'll take a look at the composite EPI score, the 15 economic indicators that contribute to the score, and regional trends and business highlights in Acadiana. Those who attend the event will come away with a story they can easily retell about the local economy and the information they need to make informed decisions for their business, their employees and the community.