On the precipice of an economic boom, two looming challenges face Louisiana

SARAH CRAWFORD scrawford@beauregarddailynews.net
Loren Scott

DERIDDER - On the cusp of an unprecedented economic growth spurt, Louisiana faces two serious threats to its newfound prosperity.

First, its labor force isn’t fully equipped to handle an explosive need for highly trained workers — adept in the fields of technology and industry. Second, the National Flood Insurance Program presents a potentially disastrous hike in premiums, and could hamper new investment.

Beyond these obstacles is the bright light of nearly 68,000 new jobs anticipated in the next two years, fueled by technology and industry, according to a recently-released report from Louisiana State University's College of Business.

The sheer volume of development stands to change the economic landscape of the state, said Brigitte Nieland, vice president for workforce development and research at Louisiana Association of Business and Industry.

"It can change people's quality of lives, if we are prepared for it," Nieland said.

North versus South

Economic growth won't be even throughout the state.

The central and northern areas of the state — regions above the I-10 — will see far fewer pockets of activity than their southern counterparts.

Loren Scott, co-author of the 2014-2015 Louisiana Economic Outlook report and a professor emeritus of economics at LSU, attributes the uneven growth to one main reason.

"That's not where the chemical industry is located," Scott said. "It's primarily located in Lake Charles, and in Baton Rouge down the Mississippi River to New Orleans."

The Metropolitan Statistical Areas of Baton Rouge and Lake Charles in particular are predicted to see strong surges, with Baton Rouge expecting almost $24 billion in expansions, Scott said.

"If Lake Charles had $2 billion worth of expansions, we would have thought that was outstanding — they have $46 billion," Scott said. "It's stunning."

The major factor driving the economy in those areas, Scott said, is the low price of natural gas, which has boosted the chemical industries.

"Chemical industries are huge consumers of natural gas, so one of their major inputs has dropped in price dramatically," he said.

Even so, he said, there are a number of positive plans that will contribute to an upswing in the economy of all northern MSAs.

"In Alexandria, you have a firm called Sundrop being built," he said. "Another is Cool Planet Energy, and it will make fuel out of wood products."

Shreveport-Bossier will see a boost from Benteler Steel, which is building a large steel mill at the port of Caddo-Bossier, and Monroe continues to benefit from one of the state's Fortune 500 companies in CenturyLink, Scott said.

"It's not like there's nothing going on north of I-10 — it's just that the great bulk of chemical industries are located in the south," he said.

Potential pitfalls

One of the biggest threats to the economy of some southeastern Louisiana parishes is the Biggert-Waters Act, which would severely increase flood insurance rates in an effort to stabilize the National Flood Insurance Program. Scott said he'd heard one example of an insurance premium jumping from $400 to $24,000.

"It's outrageous," he said. "It's something that makes you think people would abandon their homes."

It’s a potential threat to business development, but has also caused angst among homeowners, said Carolyn Kousky, a research fellow with Resources for the Future in Washington DC.

"If your community is newly mapped and you're put into a high-risk zone when you used to be in a lower-risk zone, you now have to pay the high-risk rate," Kousky said. "It caught a lot of homeowners off guard, because the maps are not updated frequently, so the changes are dramatic and the rates are much higher."

Due to outcry the act has faced, Kousky said she thinks Congress will likely hold off on enforcing these new rates until a compromise can be reached.

"There is an effort to delay all the new rates until FEMA studies affordability and comes up with some options and so forth," she said.

Lousiana’s Economic Development Secretary Stephen Moret said he believes the act is one of the biggest economic threats facing Louisiana at the moment.

"Personally, I am hopeful that Congress will come up with some kind of resolution to avoid the worst-case outcome," Moret said.

Poised, but unprepared

With the influx of new jobs will come a demand for workers to fill their ranks, and additional training will be needed for much of those employees.

The job creation rate will not peak over the next two years but rather will ramp up over a five-year period, Moret said.

"The peak year of construction activity looks like it will be 2018-2019, so we have a little time to get ready,” he said. “It’s not happening overnight.”

Once the activity gets going, a large and immediate need will be workers for the industrial construction projects, said Barry Erwin, president of Council for a Better Louisiana.

"When that part is over, we'll need another kind of worker to be able to operate in these plants," Erwin said.

Opportunities will be available for hard workers with a high school degree and a good work ethic, with additional training perhaps at a technical college, he said.

"The big thing will be the construction jobs, welders, pipe fitters — any kind of industrial construction you can think of — are all going to be part of the need," Erwin said. "We're going to have this boom in jobs that we know are going to be in this construction and industrial sector, but it's going to ripple out to the greater economy."

Out-of-state recruiting is an inevitability due to the sheer number of needs, Nieland said. Still, Louisiana residents can benefit greatly if the right training and education are obtained.

"We certainly are going to have to do a full-on state effort to provide opportunities for the proper training," she said. "We really need to have all hands on deck; not just the public sector providing training, but public and private sector partnerships. We have to be ready — this is not a boom we can squander."