Turk File

Turk File - November 2009

by Leslie Turk

Scott: forecast not so rosy for lafayette Speaking to a sold-out crowd at the Cajundome Convention Center Oct. 13, Louisiana economist Loren Scott pointed to two major areas of concern for Lafayette’s economy: the tepid extraction sector and an 8 percent decline in the city-parish budget for fiscal year 2010. “There’s stuff going on that’s not your fault,” Scott said, pointing a heavy finger of blame at the Obama administration’s proposed energy policy. Scott said the proposals would strip companies’ ability to expense intangible drilling costs (which can be up to 80 percent of the cost of drilling a well) and would also remove the allowance they get for low-producing wells.

Scott had strong words for the president, stressing that merely proposing the policies has already adversely affected Lafayette’s economy. “President Obama’s proposed $33 billion tax on the extraction industry has sent a chill through this very energy-intensive MSA,” Scott noted, evidenced by a major drop in Louisiana rig counts, the best barometer of activity. Thus far, oilfield layoffs in the Lafayette area have been kept to a minimum — and for the most part, quietly executed — but it’s possible that pace may accelerate in the coming months, some industry experts say. Lafayette Parish will close out 2009 with about a 0.9 percent decline in jobs, roughly 1,400, according to Scott. Percentage-wise that ties Lafayette with Shreveport; the only markets that will experience deeper cuts this year are Monroe, 1.3 percent or 1,000 jobs, and Lake Charles, 2.5 percent or 2,300 jobs.

Lafayette’s job market will bounce back by 2010, but not by much, the economist predicted. Despite relatively high energy prices, Scott and his researchers are projecting “rather lethargic growth” for the Lafayette MSA in 2010, 700 jobs or 0.5 percent, and in 2011, 1,000 jobs or 0.7 percent. What’s concerning is that only New Orleans is predicted to fair worse than Lafayette in terms of non-farm employment over the next two years.

“About $30 million in construction projects will help bolster the [Lafayette] MSA a bit, but there are few new firms coming in to offset the extraction tax problem,” Scott said.

Still, there are signs that activity here will remain steady in some sectors. In addition to several major construction projects under way that will take years to complete (see details in the accompanying “By the Numbers” column), Scott noted Flight Safety International’s $120 million flight simulator facility in LEDA’s Northpark Technology Center that is creating 50 to 60 jobs paying an average annual salary of $60,000, as well as the Transcom call center (formerly NuComm International) in Northgate Mall, which announced after Scott’s report went to press that it is adding 700 jobs. Transcom anticipates its total local employment will reach about 1,200 by next year.

Though it has likely adopted a wait-and-see attitude about the uncertainty of the energy industry, oil and gas services company TETRA Technologies hopes to consolidate some operations and expand in LEDA Industrial Park in Broussard, potentially creating 140 new jobs over the next year at an average annual salary above $35,000. And while Stuller Inc.’s employment is down in 2009, Scott said the company will grow over the next two years, adding 110 jobs in 2010 and 50-60 more in 2011. In particular, Scott spoke highly of the company’s new software solutions that will increase Stuller’s market share by allowing customers to design jewelry at their stores and have it shipped within seven days, thereby lowering inventory investment.

Lafayette-based Acadian Ambulance is hiring 25 support personnel and fast expanding its alarm business (it now has 200,000 alarms in 40 states), but there are troubling signs for the company as well: The need for Acadian’s medics and safety engineers for offshore work is down 40 percent, as is its fixed wing aircraft business for non-medical use, according to Scott’s report.

On the big picture side, the economist is confident the recession is over, though it did last 12 months, longer than most previous recessions (the exceptions being 1973 and 1981, both 16 months, and the Great Depression of 1929, which lasted 43 months). Scott said the index of leading economic indicators has increased for five straight months, which signaled the end of each of the last five recessions.

Louisiana as a whole did remarkably well during the national recession. “While the U.S. economy began losing jobs in January 2008 and has already experienced a 4.7 percent job decline, Louisiana did not begin to lose jobs until April 2009, and we are estimating it will lose only 11,000 jobs over the recession or only a 0.6 percent decline,” Scott said. “We are projecting that the state will add 17,800 jobs in 2010 (0.9 percent) and 18,000 jobs in 2011 (0.9 percent). Both will be new record employment levels for the state.” If Congress shuns the proposed $33 billion tax on the extraction industry and the cap-and-trade legislation fails, Louisiana’s employment — and more significantly for us, Lafayette’s employment — could perform considerably better in the next two years. “If for some reason this federal legislation gets defeated, Lafayette’s future will be much brighter than we have predicted,” Scott concluded.

We’re keeping our collective fingers crossed.

Compiled and edited by Leslie Turk; e-mail her at [email protected]