2006 Louisiana Forecast

Katrina, Rita wipe out 11 years of growth; construction to grow

By Karla Wall

Though the national economy was slowing somewhat, Louisiana's top economic forecasters were expecting the state to operate in a "recession-free environment" and predicted job growth in all of the state's major metro areas except Monroe.

That was before hurricanes Katrina and Rita visited the state in August and September.

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"Katrina and Rita wiped out 11 years of employment growth," said economists Loren Scott and James A. Richardson in the Louisiana Economic Outlook: 2006-2007.

According to the Outlook, non-farm employment is now expected to decrease by 59,700 in 2005, fall an additional 158,900 in 2006, and increase by 47,700 in 2007 as reconstruction efforts begin to make housing more available in the New Orleans area.

Scott said the construction industry will still see a sharp increase over the next several years due to several "mega-projects" still ongoing despite the interruptions of the hurricanes.

"There is an unusually large number of mega-projects in the works, most of which will go forward," Scott said. "There are two or three $1-billion-plus projects still in the works, as well as many smaller projects of more than $100 million."

Key projects:

• Electrical Plant Conversion Projects: Cleco Corporation is spending about $1 billion to retro-fit its Rodemacher Power Plant near Alexandria to run on coal rather than natural gas. Construction is due to begin this year. Also, Louisiana Generating has secured DEQ permits for a $1.3 billion project to switch from natural gas to coal power at its Big Cajun II plant in Baton Rouge.
• Shintech Corp. is investing $1 billion in a new PVC/plastics plant in Iberville Parish. Ground was broken in December for the project, which will employ roughly 2,000 construction workers, according to the Outlook.
• The recently signed federal transportation bill has earmarked, in small part, $200 million to complete I-49 from Shreveport to the Arkansas border, and $51 million for the extension of I-49 from Lafayette to New Orleans. Funds were also provided for the widening of La. Hwy. 28 from Ft. Polk to Alexandria, the extension of La. Hwy. 6 from I-49 to Toledo Bend, and a new I-49 exit at La. Hwy. 6.
• Citgo is awaiting board approval on a $1.3 billion project to build a cogeneration plant at its Lake Charles refinery.
  
  Other projects to watch:
• A $413 million project to widen the Huey P. Long Bridge in New Orleans.
• A $200 million, three-phase project to construct an 18-mile bridge from Golden Meadow to Port Fourchon. Bids will be let early this year.

Hurricane damage along the Gulf Coast region will mean a very busy few years for residential and commercial contractors, said Al Bargas, president of the Pelican Chapter of Associated Builders and Contractors.

"I expect the construction industry to be very busy for the next 10 years just from the sheer volume of rebuilding projects alone," Bargas said.

Construction of medical facilities will also remain strong throughout the coming year, said Van Champagne, estimator for The Lemoine Co. LLC of Lafayette.

Industrial construction, Bargas said, will remain strong, with the Shintech project getting underway, as well as the planned Citgo Lake Charles expansion.

A question mark is how much money will be invested in repairing damage to refineries in the Southeast corner of the state. Three refineries remain closed in the Plaquemine Parish area.

Alexandria. Pre-hurricane, the Alexandria area was projected to be the fastest growing in the state, expected to add 3,000 jobs. Post-hurricane, the area is expected to gain marginally due to the relocation of firms and families from New Orleans.

Aside from the Cleco mega-project, the area's expansion is being driven by the $10 million construction of the Union Tank Car facility, which will employ 850 at an average annual wage of $40,000. The plant is expected to be complete in 2006.

The federal penitentiary in Pollock is expanding its complex in a $90 million project that will add 14 new buildings. The project will be complete in August 2006.

Roy O. Martin lumber will build its $185 million Oriented Strand Board (OSB) facility in Oakdale, employing 170-215 workers as well as 280-380 new loggers.

Baton Rouge. The Baton Rouge area will for the first time be the largest in the state, according to the Outlook. Pre-hurricane predictions were for a job increase of 8,800 in 2006-2007.

The influx of evacuees into the area, as well as the relocation of many firms from New Orleans into Baton Rouge, will mean an additional increase of 26,300 jobs in 2006 and an additional 4,300 jobs in 2007, according to the Outlook. The population should settle in at 50,000 over pre-hurricane populations by 2007.

Industrial construction will play a major role in the area's job growth, with several projects in the works:

• The $1 billion-plus Shintech and Louisiana Generating projects
  
• Trinity Shipyard will reopen its barge manufacturing facility in Port Allen
  
• Georgia Pacific is investing $160 million in a new boiler/steam turbine unit at its Baton Rouge facility

Also, construction will begin shortly on the $42 million River Place condominium project and The Baton Rouge Advocate will begin construction on a $60 million printing facility. Baton Rouge General Hospital will spend $80 million to expand its facilities. LSU will begin construction shortly on a $54.6 million project to renovate its student union. And Our Lady of the Lake will add an $80 million heart center and a $50 million children's wing.

The Baton Rouge area also received $54.6 million in highway construction funds as part of the new highway transportation bill.

Houma. The Outlook predicts an increase of 6,200 new jobs in 2006-2007, an increase equal to that of the six-year period from 1999-2005.

Several factors will fuel this increase, according to the Outlook, including higher energy prices and the resulting increase in the oil and gas extraction sector, gains in the fabrication sector due to repair and rebuilding of extraction infrastructure in the Gulf, a significant growth in the Port of Fourchon due to destruction or damage of the two other major area ports servicing the offshore oil industry, and an increase in population as more New Orleans-area workers begin to use Houma as a bedroom community.

The $200 million project to construct a new 18-mi. elevated bridge from Golden Meadow to Port Fourchon will soon be underway, with bed letting to start in early 2006. The project will replace sections of La. 1 outside the levee system that were destroyed by Hurricane Katrina.

Bollinger Shipyards and Edison Chouest Shipyards were both reported to be looking at the Houma area as a possible site for new shipyards before the hurricane struck, according to the Outlook.

Gulf Island Fabricators was reporting its employment is back up, pre-Katrina, to 1,100 with a backlog of $86 million in work.

Lafayette. The Outlook is predicting an increase of 5,200 new jobs in the Lafayette area in 2006, and an additional 1,600 new jobs in 2007. This is the same increase experienced over the eight-year period from 1997-2005.

Driving this increase will be the movement of firms from the New Orleans area, as well as an increase in the fabrication and oilfield services sectors.

Also aiding in the area's growth is the $51 million in federal funding for the extension of I-49 from Lafayette to New Orleans, and an additional $40 million in federal highway funding to be shared with the Lake Charles area.

Seven new hotels are being constructed in the area and Air Logistics is undertaking a $12 million expansion project at New Iberia's Acadiana Regional Airport.

Lake Charles. The Lake Charles MSA will gain 3,700 jobs over 2006-2007, according to the Outlook.

The increase will come not only from hurricane damage repair, estimated by the Outlook to add 1,000 new jobs to the area, but also from the construction or planned construction of several new LNG facilities. The area will also benefit from Citgo's planned $1.3 billion construction of a cogeneration plant at its Lake Charles refinery and NuCoastal's planned reopening of the American International Refinery.

The Outlook said gains will be offset by the closure of Lyondell's Lake Charles refinery, with an estimated loss of 280 jobs, and the closure, due to damage from Hurricane Rita, of the two Harrah's riverboat casinos, with a loss of 1,400 jobs.

Monroe. The Monroe area will continue the decline experienced over the last three years, according to the Outlook, with a decrease of 300 jobs during the next year.

The decrease is a result of the layoffs by Delphi Lighting, which lost two major contracts with General Motors, the total closure of the State Farm Insurance Claim Office, layoffs at the Graphics Packaging paper mill in Monroe, and the closure of the Holsum Bakery in the area. International Paper is also considering closure, according to the outlook.

Offsetting the losses only slightly will be the addition of an Entergy Call Center, with an addition of 200 jobs, and an employee increase of 100 at the Chase Mortgage office.

New Orleans. For the first time, the New Orleans area will be the state's poorest performing due to the devastation of Hurricane Katrina.

"Katrina wiped out four decades of growth in the New Orleans (area)," says the Outlook.

Though the future of the area is still uncertain, employment is predicted to decrease in 2006 by 304,290 jobs over 2004 levels, but will add an additional 31,000 in 2007 as rebuilding efforts begin in earnest and more housing becomes available for workers.

That limitation of housing is the key factor in the area's performance over the next year, says the Outlook.

"We make the assumption that at least 75 percent of the dwellings rendered uninhabitable by Katrina - 267,756 - were in the New Orleans area," states the Outlook.

Shreveport. The Shreveport area will remain virtually unchanged by the hurricanes and the area is expected to experience an increase of 6,000 jobs over the next year.

That increase will come from Steelcase's planned $200 million plant at the Port of Shreveport-Bossier, a $50 million improvement project at the Kansas City Southern rail yard, and federal highway funding of $211.6 million for I-49 extension and other highway projects.

Also on the positive side for the region are reports of planned job increases at Beaird Industries and U.S. Support. Edison Chouest is reopening the Shreveport Fabricators plant with an addition of 150-400 new jobs, according to the Outlook.

And Continental Airlines' regional jet maintenance center will add a fourth line to its operation, adding about 80 new jobs.

Offsetting these increases is concern over decreases in casino revenues due to the opening of Indian casinos in Oklahoma, which may draw the Dallas market away from the Shreveport operations. Also, International Paper is considering closing or selling its linerboard mill in Springhill, with a possible loss of 300 jobs in the area.

Alcoa will also close its facilities in Shreveport, relocating to Kilgore, Texas, and Solocap is consolidating its operations in other states, and will close its Shreveport facility.