Jul 19, 2023 - Business

Why Louisiana's economy keeps ranking so poorly

Change in state share of national GDP
Data: BEA; Map: Simran Parwani /Axios Visuals

A group of southern states have become the country's newest economic powerhouse — along with the West.

Driving the news: But Louisiana sticks out as an outlier, landing second to last in a ranking of state GDPs as a share of national GDP.

  • A recent CNBC report also listed Louisiana as the second-worst state for business — and labeled it one of the country's "worst economies."

Why it matters: While other fast-growing states in the South now add more to the national GDP than the Northeast, Louisiana appears to be being left behind by a regional trend.

What's happening: "Bottom line, the state really hasn't recovered from the pandemic. And No. 2, the hurricane seasons since the pandemic haven't helped either," Jose Bautista, an economics professor at Xavier University in New Orleans, told Axios.

  • In fact, the state's vulnerability to catastrophic weather — especially in its crucial economic engine in south and central Louisiana — has repeatedly kneecapped its ability to grow economically, he said.
  • Just since the pandemic the state has had to recover from Hurricanes Ida, Laura, Delta and Zeta — to name only a few.

What's happening: "If you have these natural disasters occurring with frequency," he explains, it's normal for investors or prospective companies to have "some natural hesitancy to try to relocate or put up substantial amounts of capital investment in the state if it's all going to be literally washed away."

Flashback: Bautista reflected on a civic and business leader-led campaign called "Top 10 by 2020" from the early 2000s, which aimed to improve the state's "top state for business" ranking.

  • "Well, again, unfortunately [Hurricane Katrina in] August 2005 took place, and that completely wiped out that entire effort," Bautista said.

But, but, but: Recent trends are "encouraging," says Louisiana Economic Development spokesman Mark Lorando.

  • The state's GDP has increased for the last three consecutive quarters. It logged more than $20 billion in economic development investment in 2021 and 2022 and is on track to surpass that figure for 2023, he said.
  • Capital investment in the state has also been increasing since 2017, he highlighted.
  • "Capital expenditure and job creation are critical metrics," he said. "GDP is just one of many economic metrics that we take into account when assessing the strength of Louisiana's economy."

Yes, but: The state indeed has potential to capitalize on, Bautista said. CNBC gave it good marks in cost of doing business and cost of living, for example.

  • It also has strong research universities that can serve as anchors for innovation.
  • The state has promise of becoming a tech hub as part of "Silicon Bayou." Just this week, Loyola University announced new virtual bootcamps to teach people skills to transition into the tech sector.
  • And the Port of New Orleans could also be contributing more to the economy, he said.

"Louisiana’s economy has proven to be remarkably resilient and increasingly diversified," Lorando added. "Manufacturing jobs — the 'gold standard' indicator of economic health" ended last year at their highest level in seven years.

  • And the port is indeed expanding, most recently through a $1.8 billion public-private partnership to build a new container terminal.

Plus: Expanding investment in health care can also have a "multiplier effect," Bautista said, in creating jobs — but also in making the region a more desirable location for companies.

What we're watching: Despite the tough rankings, the state is seeing some hotbeds of new business activity, according to a new Axios analysis of U.S. Census Bureau and IRS data.

  • Parishes around New Orleans, Baton Rouge, Lafayette and Shreveport saw higher-than-average new business application rates in 2022.
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