2009 Business Outlook Summit The Louisiana (and Northeast Louisiana) Economy Prepared and presented by: John Francis, PHD Assistant Professor of Economics (Louisiana Tech University) Robert Eisenstadt, PhD Associate Professor of Economics (University of LA – Monroe)

The following presentation will be available for review on-line at: cba.ulm.edu/cber

GSP 2004$139,327Rank = 25 GSP 2007$151,039Rank = 25 % change in GSP %Rank = 21 % change in GSP %Rank = 11 Louisiana Gross State Product ($millions): The illusion of our insularity.

The importance of oil in Louisiana’s growth. GDP Growth and Oil Prices (index)

United States Employment146,081,000146,294,000143,350,000 Unemployment6,491,0007,541,00010,999,000 Unemployment Rate4.3%4.9%7.1% Labor Force152,572,000153,836,000154,349,000 Louisiana Employment1,922,9431,937,0931,970,615 Unemployment71,65779,895116,172 Unemployment Rate3.6%4.0%5.6% Labor Force1,994,6002,016,9882,086,787 Employment by the Numbers

Louisiana employment growth has been relatively strong. Employment data from LA Dept. Of Labor; and U.S. Bureau of Economic Analysis.

Employment growth is mostly positive across the State (qtr 2 comparison). LA Dept. of Labor, Laworks.net

The relative performance of Northeast Louisiana. OLM = Ouachita, Lincoln, Morehouse Parishes

Wage and salary disbursements: US, LA, Monroe.

Where there is no housing bubble, there is probably no housing bust. Top ten and bottom ten states for home price appreciation:

Louisiana home prices have remained relatively stable. Bismarck, ND +15% Ft. Meyers, FL -43%

Average selling prices of existing homes adjusted for inflation. Data from National Association of Realtors, Northeast Louisiana Realtors Association.

Louisiana currently ranks 41 st in foreclosure rate. Foreclosures: NV is #1 WV is #50 National data from RealtyTrac

The market for existing homes in NE Louisiana.

Home building in Louisiana mostly mirrors the Nation.

Permit data from U.S. Census Bureau; and McGraw Hill MarketTrack New Residential Construction – Permit Value

Construction employment in LA, however, remains stable. Nearly 20% annual increase in Civil Engineering projects. Public projects expected in NE LA include:  Delta Community College  New Airport Terminal

Louisiana lags the Nation in bankruptcies. U.S. Courts: U.S. Dept. of Justice

Non-Business Bankruptcies

NE LA and the Nation are on the same general retail track

Seasonal sales were stronger locally Nov-Dec (seasonal) retail sales: Nation = -5.6%; LA = -1.4%; Ouachita = +1.2%

Motor vehicle sales are weak: US = -15.8%, LA sales = -15.6% -12.8% -17.0% Data from Cross-Sell reports -15.6%

Estimated value of auto purchases by Ouachita Parish residents.

From our perspective, there are two sources of concern when considering the long-term growth of Louisiana (and NE Louisiana).  Out-migration of population  Year-to-year uncertainty (volatility) of State tax revenues Relative economic strength is by no means a certainty in Louisiana

Net migration as a % of the 2000 population ( ) Louisiana-6.76% We have shipped more people out of Louisiana than we've attracted Top 3 parishes for population growth Bottom 3 parishes for population growth.Livingston Parish23.55%.St. Bernard Parish-64.19%.Ascension Parish23.27%.Orleans Parish-47.70%.St. Tammany Parish14.83%.Cameron Parish-28.43%

Population growth is weak or even non-existent

Our 8-year trend is well behind the Nation.

Percentage change in Louisiana Monthly Tax Revenues: January/February 2008 to 2009 Current indicated effect on State revenue of Louisiana tax policy change.

($000's) combined 2008 combined 2009%change Individual withholding$356,657.8$282, % Individual total$539,714.2$533, % Public Utilities$667.2$1, % General Sales tax (excl MV)$495,246.9$460, % Severance Taxes$176,329.4$119, % Total State Revenue$1,410,362.2$1,299, % Year over Year Tax Revenues (to date) by the Numbers

Tax burden (ranking) of Louisiana and surrounding states.

Return marginal tax brackets to pre-Stelly levels:-$300,000,000 Reinstate the deductibility of excess Federal Itemized:-$250,000,000 Subtotal-$550,000,000 Oil prices budgeted at $84/bbl. Current actual price = $50/bbl Shortfall in severance taxes -$410,000,000 Total estimated shortfall-$960,000,000 LA policy changes and the (approximate) annual effect on State tax revenue. Add to this amount the effect of a declining tax base (recession) and you have the proverbial “billion here, billion there…”

Next up:  Determinants of State Tax Revenue Variability.  Labor Out-migration by Education and Skill Level.