Tuesday, Oct. 15, 2013
The Lafayette Economic Performance Index results for the second quarter are in, and the upward trajectory continues. Analyzed and compiled by the Lafayette Economic Development Authority, the index tracks the pulse of the economy of Lafayette over time, using 15,000 data points along with 15 local statistics to pinpoint the weather of the local economy.
Like any index, it combines multiple data points into a single score. This particular index monitors 15,000 data points and 15 local statistics that together illustrate a unified story about how the Lafayette economy is performing. It is more than a snapshot of the economy; it is the most accurate reflection of the economy, because it is seasonally and inflation adjusted, meaning movement in the index is based on actual changes, not those caused by changes in periodic variation or time.
The EPI is also retroactively adjusted to allow for a more accurate comparison between present and past performance of the economy. This allows for an “apples to apples” comparison of where we are and where we have been.
The June 2013 index totaled 118, up nearly 1 percent compared to June 2012. The index increased 0.7 percent from May to June, and the index did not drop below the 12-month moving average during the second quarter. This year, the EPI has held steady since the end of the first quarter, with June up 1 percent compared to March (for the purposes of this report, the EPI score is for the final month of the quarter, rather than the quarter as a whole).
The EPI experienced a slight drop in January but has since regained an upward momentum — now 2 percent higher than the 12-month moving average, signaling a very strong first and second quarter. The index’s position relative to the 12-month moving average — in our case it has been above for nine of the past 13 months — gives an indication of how the overall economy is fairing.
Looking back, Lafayette’s economy has been on a constant, almost methodical, climb for the past three years. The index increased 14 percent since hitting a decade low in August 2009.
The future looks bright, especially with recent announcements like that from Freeport-McMoRan Oil and Gas (formerly PXP), an independent oil and gas producer, which is committing to adding 600 direct jobs locally with an average annual salary of $100,000.
It comes as no surprise that Lafayette has been named to many high-profile lists such as Area Development’s Leading Locations list of 380 U.S. metro areas. Not only did the Lafayette MSA (Lafayette and St. Martin parishes) finish first overall, but Lafayette also topped the mid-sized cities list and the overall list for Economic Strength, which looked at workforce and labor factors.
Analyzed as a whole, all 15 indicators show that they are performing strong as compared to the second quarter of 2012. When all three categories of indicators — leading, current and lagging— move in the same upward direction, it means that the local economy is on track for continued growth and prosperity.
Considering 2012 was a banner year for Lafayette, any improvement is icing on the cake for the local economy.
Gregg Gothreaux is president and CEO of the Lafayette Economic Development Authority.
Leading indicators are those that change three to six months prior to the overall economy showing signs of adjustment. In June, two of the six leading indicators saw declines from their previous year’s score, while the rest of the indicators enjoyed sizable increases over last year. This marks another encouraging quarter for the local economy.
Lafayette average weekly initial unemployment insurance claims declined 1.6 percent from May to June and are down 6 percent from June 2012. Seasonally-adjusted claims have been on the decline since 2009, and are now at a six-year low.
The Lafayette stock index has continued its upward trend with a score of 241.7. This is 8.9 percent higher than June of last year. After hitting a 10-year low in February 2009, the index has grown 96 percent to achieve the 10-year high in June of this year.
Louisiana average manufacturing weekly hours has dipped slightly to 43.6 hours worked a week in June — a negligible decrease of 0.2 percent since June 2012. It should be appreciated that each month since April 2011 has averaged more than 41 hours per week and no month after February 2010 has averaged less than 40 hours per week. Anything above 40 hours per week is considered healthy.
Residential building permits in Lafayette and unincorporated areas of the parish saw a 21.1 percent increase from June 2012. While much of the recent residential growth in the parish has been attributed to home construction in neighboring municipalities, which are not reflected in the index, it is a welcome increase in home building for Lafayette. Given the vitality of the overall economy, local housing conditions should continue to improve for all of Lafayette Parish as a whole.
In June, the Bureau of Safety and Environment Enforcement approved eight drilling permits in the Gulf of Mexico — less than the 13 permits issued during the same month of 2012. Despite some month-to-month volatility, the 12-month moving average for GOM drilling permits has trended upwards for the past eight quarters, signaling sustained improvement. Louisiana drilling permits saw a large jump between May (130 permits) and June (170 permits), but only saw a slight increase of 1.2 percent since June 2012. While GOM drilling permits seem to be continuing their steady increase, Louisiana drilling permits have been rather stable for the past two years despite month-to-month volatility. Since third quarter 2011, the 12-month moving average for Louisiana drilling permits hasn’t gone below 140 and hasn’t gone above 150.
Current indicators — those that change at the same time that the overall economy shows signs of adjustment — continue to show strength in the second quarter.
Retail sales is one of the top economic indicators because it indicates the amount of consumer spending and confidence present in a community. June saw more than $537 million in sales; and halfway through the year, Lafayette retailers reached just shy of $3 billion in sales. This is a 2.9 percent increase over the second quarter of 2012. Sales for each month since November of last year have been above the 12-month moving average, signaling the continued upward trend in retail sales along with a healthy consumer confidence.
Lafayette Parish hotel/motel receipts also continue to outperform 2012 numbers. June receipts totaled $6.9 million and outperformed 2012 by 2.9 percent. Year-to-date, hotel/motel receipts are 3 percent higher than the previous year. The performance of retail sales and hotel/motel receipts indicates just how strong the Lafayette hospitality market truly is, especially since these numbers are adjusted for inflation and seasonality.
Non-farm employment in the Lafayette MSA (Lafayette and St. Martin parishes) is among the strongest indicators with almost 159,000 jobs. More than 15,000 jobs have been added since the end of the recession. Lafayette has increased jobs by 11 percent, whereas the national economy has added jobs at a slower rate of 7 percent since the recession. The second quarter saw the highest employment level ever seen in the Lafayette metro. As long as the indicators continue to improve, look for local businesses to continue adding jobs.
Other current indicators such as Lafayette Regional Airport enplanements and average home sale prices continue to show positive momentum. Monthly enplanements in the second quarter were the second best quarter ever recorded, which is good news for the airport and the intended passenger terminal expansion. The average home sale price of single family homes in Lafayette is also performing well, reflecting strong performances by other indicators.
Not only did prices beat the 12-month moving average for the entire quarter, but April saw the largest average sales price since November 2010 at $194,002. Despite the month-to-month volatility, the average sales price has been creeping up since the beginning of 2012, and the 12-month moving average has been climbing since late 2012 reinforcing the upward trend.
This year the lagging indicators — those changing three to six months after the overall economy adjusts — are continuing to align themselves with the healthy leading and current indicators.
Lafayette’s non-seasonally adjusted unemployment rate in June was 5.8 percent, the second lowest in the state. June unemployment rate is historically the highest during the year due to the cyclical nature of the university’s payroll. However, looking at the seasonally adjusted rate in June, the unemployment rate was only 5 percent. Not only is the unemployment rate in Lafayette Parish one of the lowest in the state (and among the lowest in the country), those individuals that are unemployed are unemployed for shorter lengths of time. The average duration of unemployment in Louisiana is 12 weeks — as opposed to 14 weeks in June 2012. This marks the shortest duration of unemployment in four and half years.
In addition to the positive employment indicators, the state of bankruptcies in the Western District of Louisiana has continued to improve with only 867 bankruptcies in June. Bankruptcies have decreased 7.5 percent from last June and are down 29 percent from their high in September 2009.
Louisiana rig counts are the only lagging indicator that has not shown considerable improvement in the past two years. There were 106 rigs on and offshore this June, which is down from 124 last June. The continuing decline in rigs, mainly onshore in the Haynesville Shale area, is the result of falling natural gas prices. Rapid drilling programs and enhanced recovery techniques resulted in an increase to the natural gas supply which was not met with an equal amount of demand, causing gas prices to drop to $2/MMBtu in mid-2012. On a positive note, natural gas prices in the first half of this year have averaged 50 percent higher than the first half of last year with an average price of $3.68/MMBtu. The higher natural gas prices could positively affect rig counts further down the line, but for the mean time this indicator continues to decrease.
In June, the offshore rig count stayed fairly stable at 45, up from the low of 14 in 2010. Though offshore and North Louisiana rig counts are sending mixed signals, the offshore rig counts are optimistic. Due to the steadily climbing price per barrel of crude oil, companies have reported strong earnings.
This should translate into more exploration and development by those companies. When one rig may represent thousands of jobs and hundreds of millions of dollars in capital investment, this is good news to Louisiana and especially Lafayette Parish.