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Oil and gas output contracts in 2014, dragging Louisiana economy below national growth rate

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New figures show Louisiana's economy grew by 1.9 percent in 2014, lagging nationwide growth of 2.2 percent.

Gross domestic product numbers released Wednesday by the federal Bureau of Economic Analysis try to measure total economic output of each state.

Louisiana's $251 billion economy ranked 19th among the states for growth, with North Dakota growing the fastest. Alaska and Mississippi were the only states where economies shrank.

The numbers can change later — Louisiana's 2013 results were revised down from an initial estimate of a 1.8 percent expansion to a 2.5 percent contraction. That's a surprise, considering strong job growth in the state that year, but it reflects decreased value of oil, natural gas and petrochemicals.

Federal figures show the biggest contributor to growth in Louisiana last year came from makers of nondurable goods, including oil and chemical refiners, adding more than 2 percentage points to growth. That reflects a continued investment boom in refineries and chemical plants, fueled by low natural gas prices.

"That's where a lot of our expansion has been," said Louisiana State University economist James Richardson, who serves on the state revenue estimating board.

But those low prices also contributed to mining, including oil and natural gas extraction, being the biggest drag on the state's economy. Natural gas output in Louisiana continues to fall as initial wells drilled in the Haynesville Shale become less productive and relatively few new wells are drilled. The Energy Information Administration estimates that natural gas production in Louisiana fell by 20 percent in 2014, to 3 trillion cubic feet, even as natural gas output nationwide rose. EIA figures show crude oil production in Louisiana fell almost 5 percent in 2014.

Government was the second biggest drag on Louisiana's economy, and the sector shrank more than in any other state. Richardson said some of the decrease in government came from the privatization of nearly all of LSU's charity hospitals statewide. The health care sector, though it increased more than the national average, did not grow as fast as government shrank.

Officials in Gov. Bobby Jindal's administration have tended to discount the shrinkage of the government sector in Louisiana, saying those cuts are part of encouraging private growth. Advocates for health care and higher education have said the cuts are doing permanent harm, though.

"Our focus in economic development is on the private sector," Louisiana Economic Development Director Steven Grissom said. "That's why we've cut taxes and focused on economic development and making it easier to do business in Louisiana."

Louisiana grew faster than the Southeast as a whole, which expanded by 1.7 percent. Mississippi's economy shrank 1.2 percent, and Arkansas grew 0.8 percent. Texas, though, grew by 5.2 percent, second-best in the nation.

The revisions to the 2013 data show Louisiana's economy shrank that year, driven by decreases in output from oil and gas extraction, refining, chemical manufacturing and government. The downward revision came even though the state added nearly 25,000 payroll jobs that year, and reflects in part the volatility of oil and gas-driven sectors.

"Certainly it doesn't align with the trends we've seen in job growth," Grissom said.


Online: State economic growth: http://1.usa.gov/SNxFxd


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