Originally posted at Pelican Institute.
Louisiana ranks 23rd among U.S. states in the Fraser Institute’s latest2024 Economic Freedom of North America (EFNA) report, reflecting persistent challenges with high taxes, excessive government spending, and restrictive labor market policies. However, recent reforms give hope for a brighter future. With targeted action, Louisiana can rise in the rankings and create a more competitive, dynamic economy for Louisianans. Taxation: Progress on the HorizonLouisiana’s tax system has long been a barrier to economic freedom. High income and corporate tax rates have discouraged business investment and job creation, contributing to the state’s middling EFNA ranking. However,recent tax reforms are changing the narrative. Last month, the state introduced a flat 3% individual income tax rate—down from a progressive tax structure—and a flat corporate income tax rate of 5.5%, eliminating the corporate franchise tax. These proposed changes, which voters will approve in March 2025, simplify the tax structure and aim to attract businesses and high-income earners. While these reforms will take time to influence the EFNA rankings, they signal a significant step toward improved tax competitiveness and economic freedom. Government Spending: A Gator-Sized Problem Louisiana struggles with high per capita government spending, which weighs heavily on taxpayers and relies heavily on federal aid. Inefficiencies and wasteful expenditures drain resources that could fund critical infrastructure or expand educational options for families. Adopting stricter fiscal discipline is essential. Louisiana lawmakers recently took steps to curb the growth of recurring spending using the state’s general fund, but more will be needed. Like Colorado’s model, a population-plus-inflation expenditure limit would curb overall spending growth and stabilize the state’s finances. Additionally, priority-based budgeting would ensure funds are allocated efficiently, cutting waste and maximizing impact. Rising state and local debt and dependency on the state purse strings will continue to threaten fiscal stability without these measures. Labor Market Regulations: Unlocking Potential Ranked 34th in labor market freedom, Louisiana’s restrictive occupational licensing laws limit workforce mobility and discourage entrepreneurship. Licensing requirements often serve as unnecessary barriers to entry, making it harder for low-income residents to access higher-paying opportunities. Streamlining licensing requirements would help Louisiana attract skilled professionals and improve economic mobility. Louisiana has taken bold steps to enact universal licensing recognition and to strengthen licensure regulation ties to health, safety, welfare, and fiduciary objectives, but numerous requirements not tied to these objectives remain in the state’s statutes. Removing these overly restrictive barriers is essential for creating a flexible labor market and encouraging innovation and job growth. How Louisiana Stacks Up Louisiana lags behind regional leaders in economic freedom:
A Roadmap to Improvement To climb the rankings and foster prosperity, Louisiana must focus on three key reforms:
Conclusion Louisiana can increase economic freedom but must remain committed to meaningful reforms. Recent tax policy changes are an encouraging start, but addressing government spending and labor market regulations will be critical to future success. By focusing on these priorities, Louisiana can become a beacon of opportunity in the South. Economic freedom is the foundation of prosperity, and Louisiana is ready to show its residents—and the nation—what’s possible with the right policies.
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Originally published at Pelican Institute. Louisiana ranks 40th in the 2025 State Tax Competitiveness Index, reflecting its historically complex and burdensome tax system. However, sweeping tax reforms enacted in 2024 are set to improve its ranking significantly in future reports. These reforms, which simplify income taxes, eliminate the business franchise tax, and address key structural challenges, mark a major step forward. Yet, to ensure these gains are sustainable, Louisiana must embrace spending restraint and use surplus revenues to further reduce and eventually eliminate income taxes. What Is the State Tax Competitiveness Index? The State Tax Competitiveness Index, formerly the State Business Tax Climate Index, measures how well states structure their tax systems. It evaluates five key areas: corporate taxes, individual income taxes, sales taxes, property taxes, and unemployment insurance taxes. States that rank highest have tax systems that are simple, transparent, and designed to minimize economic distortions. Louisiana’s low ranking has long been driven by its high combined sales tax rates, punitive inventory taxes, and a franchise tax that penalized investment. The following tables show the rankings for Louisiana by tax category and compare them with those of other states. Top Overall States
Bottom Overall States
Neighboring States
Transformative 2024 Tax Reforms The 2024 tax reforms during a special session called by Louisiana Governor Jeff Landry addressed several of these issues, creating a foundation for improved competitiveness:
These reforms will likely raise Louisiana’s ranking in the 2026 State Tax Competitiveness Index, closing the gap with states like Texas and Florida, which do not have income taxes. The Role of Spending Restraint While these tax changes represent meaningful progress, they will only deliver sustainable benefits if accompanied by spending discipline. Louisiana can use its current surplus to buy down income tax rates further and eventually eliminate them. Adopting a fiscally conservative framework would prevent unsustainable budget expansions and allow tax relief to last. Spending restraint ensures that tax reductions are not followed by future tax hikes, preserving Louisiana’s competitiveness in the long term. Recommendations for Bold Progress
The 2024 tax reforms provide Louisiana with a transformative opportunity to overhaul its economic trajectory. These changes simplify the tax code, improve business competitiveness, and set the stage for Louisiana to rise in future editions of the State Tax Competitiveness Index. To fully capitalize on these gains, Louisiana must pair its tax reforms with strong spending restraint and use its surplus strategically to phase out income taxes. By doing so, the Pelican State can emerge as a leader in economic growth and competitiveness, attracting businesses, residents, and investment. Originally published at Pelican Institute.
With its rich cultural heritage and strategic location along the Gulf of Mexico, Louisiana boasts significant economic potential. However, recent data underscores the need for the state to tap into this potential and enhance its economic growth, especially in comparison to its neighboring states. As of September 2024, Louisiana’s unemployment rate is 3.9%, a slight increase from the previous year but below the national average of 4.1%. Over the past twelve months, Louisiana added 2,000 jobs, a 0.1% increase in nonfarm employment. This growth is positive but well below the 1.3% national rate and significantly lower than regional competitors like Texas (2.3%) and Florida (2.1%), where job growth has been much stronger. It’s imperative for Louisiana to keep pace with its neighboring states. By urgently implementing bold pro-growth policies, such as lowering taxes, reducing regulations, and improving workforce development, the state can create an environment that attracts businesses, generates jobs, and enhances overall economic prosperity. Comparing Louisiana with Neighboring States The contrast between Louisiana and its neighboring states is stark. Texas continues to lead the pack, with 327,400 new jobs added over the past year. Meanwhile, Florida has also experienced strong economic growth, with its unemployment rate declining to 2.8%, among the lowest in the region. While still facing economic challenges, Mississippi has recently seen a boost in job creation through pro-business reforms, resulting in an unemployment rate of 3.3%. Louisiana’s relatively slower job growth and higher unemployment rate prove the urgent need for reform. The state’s heavy reliance on the oil and gas sector, while a source of strength in the past, has created economic volatility. Diversification into industries such as manufacturing, technology, and tourism, coupled with meaningful policy reforms, is not just important but crucial for Louisiana to remain competitive in the region. Pro-Growth Policy Recommendations for Louisiana To unlock its economic potential, Louisiana should consider implementing several key reforms that have proven successful in other states:
Moving Louisiana Forward Louisiana’s economy has shown signs of recovery, but much more work must be done. By embracing pro-growth policies focused on reducing taxes, streamlining regulations, and integrating workforce and social services while prioritizing high-demand, high-value career opportunities, Louisiana can revitalize its economy and compete more effectively with its neighbors. The state’s natural resources, cultural vibrancy, and strategic location give it a strong foundation to build, but success will require bold leadership and a commitment to reform. Originally published at Pelican Institute.
Louisiana’s economy, deeply reliant on global trade, faces unique challenges under the weight of federal tariffs. As recent protectionist policies continue to gain traction, Louisiana finds itself vulnerable to the unintended consequences of these measures, which often do more harm than good. While these tariffs are marketed to protect American industries, they act as a hidden tax that burdens consumers and producers, ultimately stifling economic growth and prosperity. At first glance, tariffs might seem like a tool to bolster domestic industries by making imported goods more expensive and less competitive. However, the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are passed down to consumers and businesses. When the federal government imposes tariffs, it raises the prices of goods that Louisiana’s industries rely on, leading to higher production costs. This isn’t just an abstract economic concept—it affects every Louisianan who buys a car, electronics, or even groceries. Louisiana’s Trade Profile In 2023, Louisiana exported over $122 billion worth of goods, making it the 3rd largest exporter among U.S. states. The state’s top exports included liquefied natural gas (LNG) at $22.2 billion, light petroleum distillates at $16.3 billion, and soybeans at $14.4 billion. These exports underscore Louisiana’s significant role in global energy and agricultural markets. On the import side, Louisiana purchased $38.2 billion of goods from foreign countries, ranking as the 24th largest importer among U.S. states. The top imports included petroleum oils ($5.78 billion), light petroleum distillates ($4.63 billion), and copper cathodes ($1.31 billion). This robust trade activity highlights imports’ critical role in supporting Louisiana’s industries, particularly in energy production and manufacturing. Despite this impressive trade performance, Louisiana faces a substantial trade deficit driven by the high volume of imports relative to exports. The state’s reliance on imported petroleum and other raw materials exposes it to the direct impact of federal tariffs, which increase the cost of these essential goods. While a trade deficit is often considered a detriment to an economy, these imports are important to the production process and consumers who desire the goods. What’s more important is that the total trade volume in Louisiana is $160 billion with other countries to satisfy the needs and wants of Louisianans. Recall that people trade, not countries or states, so they trade only when both parties mutually benefit. The Economics Behind Tariffs When tariffs increase, they tax the goods Louisiana imports, impacting both producers and consumers who depend on these foreign products. This tax reduces demand for foreign currencies while increasing demand for the U.S. dollar, especially when federal deficits drive interest rates higher. This dynamic results in an appreciated dollar, which, while keeping the cost of taxed goods from rising too quickly, also disrupts supply chains and other production factors. As the dollar appreciates, U.S. exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the questionable goal of balancing or reducing the trade deficit with the targeted country or others. Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This scenario is particularly detrimental to Louisiana, where trade is crucial to the state’s economic health. Although tariffs don’t directly cause inflation—an issue controlled by the Federal Reserve’s monetary policy—they raise prices on specific goods through the added tax. These increased costs ripple through the supply chain, affecting many products. As highlighted by the Tax Foundation, tariffs can also reduce economic output, lower wages, and lead to job losses in affected industries, further illustrating the negative impacts of such policies. Navigating Federal Uncertainty with Fiscal Conservatism Given the federal uncertainty and the complexities of international trade, Louisiana must focus on improving its competitiveness to navigate these challenges effectively. The state should consider pro-growth policies of spending less, cutting taxes, and supporting a workforce for careers that align education and training programs with the needs of key industries. This will help Louisiana develop a skilled workforce that attracts businesses and supports existing industries. A well-trained workforce is critical to maintaining the state’s competitive edge, which will be helped by the recent passage of the LA GATOR Scholarship Program to empower parents with school choice. Another vital step is reducing regulatory burdens at the state level. By streamlining regulations, Louisiana can offset some of the negative impacts of federal tariffs, fostering a more business-friendly environment that encourages investment and job creation. Moreover, promoting Louisiana’s status as a right-to-work state helps maintain its competitive advantage. The flexibility offered by right-to-work laws is attractive to businesses, particularly those looking for a more favorable labor environment. Diversifying trade relationships is also essential. While trade with major economies like China is significant, Louisiana must continue to expand its exports to other regions and countries. By doing so, the state can reduce reliance on any single market, mitigating the risks associated with global trade tensions. Conclusion Tariffs, while intended to protect American industries, ultimately function as a tax that harms consumers and producers. For Louisiana, where the economy is deeply integrated with global trade, the negative effects of tariffs are particularly severe. Louisiana must embrace fiscal conservatism, improve competitiveness, and address the real domestic issues hindering growth to secure the state’s economic future. By doing so, Louisiana can ensure that its industries remain competitive, its economy is resilient, and its citizens are prosperous in a global economy. Originally published at Pelican Institute.
Environmental, Social, and Governance (ESG) investing has gained popularity for promoting environmental sustainability, social justice, and ethical governance. However, this approach often leads to lower investment returns, significantly impacting taxpayers and the economy. In states like Louisiana, where the oil and gas industry is crucial for economic stability, mandating ESG investing could have serious consequences. Governments must focus on maximizing fiduciary responsibilities over politically driven ESG criteria to ensure the highest returns for public funds. Louisiana’s economy heavily relies on oil and gas activities. According to the U.S. Energy Information Administration (EIA), Louisiana is a leading crude oil and natural gas producer, contributing substantially to the state’s economic output. The state has substantial refining capacity, with some of the nation’s largest refineries located along its Gulf Coast. Imposing ESG mandates can disrupt this critical sector, potentially reducing economic growth and increasing consumer costs. Louisiana risks undermining its economic foundation by diverting investments to ESG funds, which often underperform compared to traditional indices. Recognizing these economic threats, Louisiana has taken proactive steps to protect its financial interests. In 2022, the Louisiana Treasurer announced a plan to divest state funds from BlackRock, citing concerns over the company’s focus on ESG criteria that conflict with the state’s economic interests. This plan included removing $794 million from BlackRock funds. This underscores Louisiana’s commitment to prioritizing financial returns and protecting the state’s vital oil and gas industry from the negative impacts of ESG-driven investment strategies. This year, Louisiana passed SB234, prohibiting state and local government entities from contracting with entities that discriminate against firearm dealers and ammunition industries. Texas and Oklahoma have taken similar stances against ESG investing. Texas passed Senate Bills 13 and 19 in 2021, prohibiting state investments in companies that boycott firearm and ammunition industries or fossil fuels, respectively. These laws help preserve economic interests and keep public funds from chasing poor returns. Similarly, Oklahoma passed the Energy Discrimination Elimination Act (EDEA) in 2022 to protect its vital oil and gas sector from the adverse effects of ESG investing. This Act restricts state and local governments from contracting with financial firms that boycott energy companies and ensures that investment decisions are based on financial merit rather than political considerations. The pushback against ESG mandates is not limited to Texas, Oklahoma, and Louisiana. Across the United States, states are grappling with the implications of taxpayer funding for ESG activities. A state-by-state snapshot of the ESG policy landscape reveals a growing trend of legislative actions to curb ESG investing. States like Florida and West Virginia have also passed laws to prevent state funds from being used for ESG investments. A study by the Committee to Unleash Prosperity reveals that ESG investing often results in lower financial returns. This finding supports the argument that ESG criteria should not drive public investment strategies. Additionally, research from the Center for Retirement Research shows that ESG investments underperform compared to traditional indices, further questioning the efficacy of ESG mandates. Investment managers for state and local funds, such as public pensions for teachers and state employees, have a fiduciary duty to ensure the highest rate of return. ESG investing often conflicts with this duty by prioritizing non-financial criteria, leading to lower returns. The legislative actions in Louisiana, Texas, and Oklahoma exemplify how state policy can safeguard scarce taxpayer resources. The opportunity costs of ESG investing are significant. Diverting funds from high-performing investments in traditional energy sectors to ESG projects can result in lower economic growth and higher consumer costs. In Louisiana, where the oil and gas industry is a cornerstone of the economy, such a shift can lead to job losses, reduced economic activity, and lower tax revenues, ultimately harming the communities that ESG policies aim to protect. Policymakers in Louisiana and other states should continue prioritizing fiduciary responsibilities and avoiding ESG investments that do not serve the best interests of taxpayers. Transparent and independent audits of investment decisions can ensure that public funds are managed responsibly, promoting economic growth and stability. While ESG investing is acceptable for the private sector, given that individuals can choose what to invest in and take on whatever amount of risk makes sense for them, the government has no money, so it should use taxpayer dollars as conservatively as possible. Originally published at Pelican Institute. It’s Geaux Time in Louisiana. The potential changes in Baton Rouge to remove barriers to work and let people keep more of their hard-earned money provide a more optimistic path for the Pelican State. This is much needed given the declining population over time and declines in employment for eight straight months. Let’s consider the latest data to see what’s really going on. The U.S. Bureau of Labor Statistics recently released Louisiana’s labor market data for February. These data provide details to evaluate how people are doing across the state. Louisiana’s unemployment rate increased to 4.2% per the household survey.
Employment has declined by 16,034 since March 2023, with employment declining in eight of the last eleven months.
Louisiana workers’ purchasing power continues to decline across most industries.
Figure 1. Louisiana’s Labor Market by Industry Economic growth has slowed, and GDP and personal income growth are below the U.S. average.
Bottom Line: Louisiana’s economy is mostly weak with some green shoots for growth. These past results are based on the state’s complicated tax system, high regulations, and excessive government spending that have resulted in a poor business tax climate, net out-migration, and one of the highest poverty rates in the country. But with changes in Baton Rouge this year, there is an opportunity for bold, pro-growth reforms.
These bold reforms include:
Originally published at Pelican Institute.
Spending, not taxes, is the ultimate burden of government. If you don’t spend money on a program, you don’t need to collect taxes to fund it. And if you don’t spend money on programs, the government can’t regulate things. Remember that government spending is paid for by the people, as the government creates nothing to earn income, so considering what people can afford is crucial. This is why it’s essential for governments at every level to narrow their scope to the essential functions enshrined in constitutions. Otherwise, spending grows too much and results in taxes being too burdensome on people. Governments across the country and the globe are spending too much. And it appears that a sustainable budget revolution is happening! I’ve been working for over a decade to help state, federal, and local governments create and adopt sustainable budgets that fund limited government. This is critical to keeping taxes and regulations lower than otherwise, so families and entrepreneurs have more of their hard-earned money in their pockets. This standard is called a fiscal rule or a tax and expenditure limit (TEL), which goes like this: a government’s budget growth cannot exceed the rate of population growth plus inflation. How does this simple rule work? This approach started in 2013 when I helped develop the Conservative Texas Budget. After years of excessive spending in Texas, we defined the narrative of a tangible cap on appropriations based on the rate of population growth plus inflation. There was no change in the state’s law right away, but this approach worked well for several sessions by helping keep spending within this rate, which represents the average taxpayer’s ability to pay for spending. Importantly, this is a maximum growth limit, as most states need to spend much less than this limit as they are already spending too much, which will help leave more money in people’s pockets. Over the years, this rule has been used to help state and local governments make their budgets more sustainable. One such victory came in 2021 when Texas put Senate Bill 1336 into law. The bill changed the state’s budget limit to not exceed the rate of population growth and inflation when it had been based on personal income growth. This was an extraordinary reform that took nearly a decade to accomplish. It’s not perfect, as it should be in the state’s constitution and should cover all state funds and use population growth plus inflation. But it’s one of, if not the, best in the country. The other spending limit that has long been the gold standard is the Taxpayer’s Bill of Rights (TABOR) in Colorado, which I recently outlined how it needed to be improved as it has been weakened over time. By working with think tanks, grassroots organizations, and lawmakers across the country, I’ve helped create and pass sustainable budgets for the following states: Alaska, Florida, Iowa, Michigan, Mississippi, Montana, South Carolina, and Tennessee. I’ve also worked with other states where a sustainable budget was proposed, such as Kansas and Louisiana, but hasn’t yet passed. Partnering with Americans for Tax Reform, I’ve contributed to creating the Sustainable Budget Project, which monitors state government spending and evaluates the adoption of sustainable budgets across all states. This Project has a slightly different methodology and purpose than the one outlined above, as the focus is on spending at the end of a budget period instead of the one I’ve been using for appropriations at the start of the appropriations process. Together, these approaches can help states define the narrative about the need for spending restraint on the budget process’s front and back end. Given the excessive spending by governments and the incentive to continue doing so, there should be as many safeguards as possible. As Louisiana enters a new year with a new session and new governor this year, lawmakers have an extraordinary opportunity to prioritize sustainable budgeting by adopting what we’re calling a Responsible Louisiana Budget. The Pelican Institute released the first iteration of the RLB last year and the second one this year. This isn’t just about fiscal responsibility; it’s an effort that will help the people of Louisiana prosper. It will do so by helping Louisianans not be overburdened by unnecessary taxes for more money in their pockets. It’s Geaux Time in Louisiana, and that includes sustainable budgeting! Originally published at Pelican Institute. The report to achieve Louisiana’s 2024-2025 Responsible Budget presents solutions to rein in the extraordinary growth of the budget in order to give the state a competitive advantage, much like those used in other states, such as Texas and Florida, limiting the amount of funding appropriated at the beginning of each fiscal year. Over the past decade, state spending has increased an average of 5.9% per year. Using the recommended Responsible Budget growth limit outlined in this report, state spending would have increased by only 2.1% per year, which would allow the excess state revenue to be saved for tax relief for Louisiana families. Louisiana’s economy needs a comeback. While there are many reasons why, a major reason is that the state has now had a declining population for seven straight years, and employment has declined for six consecutive months. While there are positive indicators on the surface, the reality is much different for many Louisianans. Let’s dive into the data and see what’s going on. The Pelican State has abundant resources, but many failed public policies keep Louisianans from flourishing. Louisiana’s population declines again as people move to other states. The U.S. Census Bureau recently released population data for each state. Louisiana’s population declined in 2023 by 14,274 people to 4.57 million. Making matters worse, this was the seventh consecutive year that Louisiana’s population has declined to a total of 107,000 fewer people residing here since 2016. The new data also provides net domestic migration, telling us how many people enter or exit the Pelican State from other states. Figure 1 shows how Louisiana had the sixth largest outmigration to other states. The net outmigration for 2023 was 29,692 people, representing a 0.6% decline. Figure 1: Louisiana had the Sixth Largest Net Outmigration Source: Tax Foundation But that’s not the worst part; the state has had net outmigration for at least the last four years, with 110,709 people fleeing Louisiana for another state since 2020. This is a terrible trend for the state as families are broken up, people with higher skills and incomes typically leave, and the economy suffers. Of course, these declines in the population make many of the labor market measures look better than they would have had these people stayed in Louisiana. The U.S. Bureau of Labor Statistics recently released Louisiana’s labor market data for December to help us evaluate how people are doing across the state. Louisiana’s unemployment rate would be 5.5% if the working-age population hadn’t declined since February 2020 instead of the reported 3.7% rate.
Louisiana’s employment level from the household survey shows it has declined in seven straight months for a total decline of 29,450 jobs since May 2023.
Louisiana workers’ purchasing power continues to decline across most industries.
Figure 2. Louisiana’s Labor Market by Industry Source: U.S. Bureau of Labor Statistics Economic growth has picked up, but personal income lags the U.S. average.
Figure 3: Personal Income Growth by State in Q3:2023 Source: U.S. Bureau of Economic Analysis
Bottom Line: Louisiana’s economy shows some signs of strength when you look at the broader economy. But those gains do not reflect what is going on in the labor market so there is likely going to be less growth in the economy soon with more job losses to come. Given these results, there will not be improvements in the state’s poor business tax climate, net out-migration of Louisianans, or Louisiana having one of the highest poverty rates in the country—unless bold, pro-growth reforms are enacted soon. These bold reforms include:
Originally posted at Pelican Institute where I co-wrote it with Jamie Tairov. The Pelican Institute has highlighted the need for better state budgeting and tax reform. This includes the Responsible Louisiana Budget (RLB), which was released earlier this year. The RLB shows that Louisiana’s budget has been growing at unsustainable levels, and that an improved growth factor for the expenditure limit and initial appropriations is needed. Recently, Americans for Tax Reform released a similar comparison for all 50 states, including Louisiana, in its Sustainable Budget Project. This report shows that, on the surface, Louisiana’s spending has not been as unsustainable as the RLB shows. Why is there a different outcome in the two reports?
Outcomes of Each Report The Responsible Budget model is currently being used successfully in other states to rein in spending. This is what Louisiana’s budget would have looked like had the RLB been employed over the last ten years.
Here are the findings from ATR’s Sustainable Budget study over the last decade:
Total spending in FY 22 was 34.4%, or $11.2 billion, higher than the improved expenditure limit. This means that a family of four is paying $8,800 more in taxes to pay for the excess spending, which is not sustainable spending. Is One Report Better Than the Other?
No. Both reports are accurate and serve different purposes. The RLB uses initial appropriations which helps lawmakers easily compare appropriation amounts from year to year as they are drafting the budget during session. Because it covers spending instead of appropriations, the ATR study is a backwards-looking metric that can be used for making longer-term spending decisions, but it will be limited in its use during a legislative session. Both reports compare the current expenditure limit with a proposed improved expenditure limit. The current limit is the three-year average of personal income growth, which is an extremely volatile measure. The proposed improved limit is the three-year average of population growth plus inflation. The RLB and ATR reports can work together, providing limits on the front and back end to ensure that spending remains responsible throughout the year. Both reports show recent elevated appropriations and spending. There is clearly room for budgeting restraint in Louisiana. These measures have benefits to lawmakers and the public so that they can have the tools necessary to restrain government spending and provide a responsible budget. Doing so will have many payoffs over time, including making the comeback in the Pelican State happen more quickly by eliminating personal income taxes, providing a more dynamic economy, and improving opportunities for people to flourish. Our new report highlights Louisiana’s economic situation based on the most recent data. The report is based on several key factors that indicate how the economy, labor market, and public policy influence the lives of everyday Louisianans. While some of these data indicate a relatively strong labor market–such as the historically low unemployment rate–there are underlying factors showing Louisiana’s economic struggle. Our Louisiana Comeback will happen through reforms that remove government barriers, bring jobs and opportunity back to Louisiana, and let people prosper. We must decide: Will we continue to hold on to the status quo (which hasn’t done us any favors), or will we embrace the significant reforms necessary to bring jobs and opportunity to Louisiana? We need the latter. Read the full two-pager: Economic Report Oct 2023 Originally published by Pelican Institute. At first glance, you might think that Louisiana’s economy is doing great. After all, the state’s September 2023 jobs report shows record lows for the unemployment rate at 3.3% and and people unemployed at 67,930. Louisiana Governor John Bel Edwards cheered these data in a press release: “Louisiana continues to set records for low unemployment. We’ve had 30 consecutive months of job growth and have added nearly 280,000 jobs since the worst of the pandemic. In fact, our employment levels are now higher than they were before COVID. Experts believe that our bipartisan work to grow and diversify our economy will benefit Louisiana for years to come. Economist Dr. Loren Scott recently predicted that Louisiana will add more than 80,000 jobs over the next two years. And we’ve done it all while overcoming historic natural disasters and a state government budget crisis. I have never been more optimistic about Louisiana than I am today.” But does what you hear in the media or by some politicians match reality? Let’s dive into the data to see how things are going for Louisianans. We should know that the Pelican State has many fantastic resources but too many failed public policies that keep Louisianans from reaching their full potential. This has been the case for a while, but most recently, the jobs reports indicate slowing employment growth and a declining labor force. Work matters, as it brings about dignity and self-sufficiency and leaves fewer people needing help from government safety net programs. These data below show that while the labor market data can look good on the surface, there are many real problems facing Louisianans that need to be addressed by state leaders. Fortunately, the Pelican Institute’s “Comeback Agenda,” including our fiscal reform plan, supports ways to overcome these challenges. Here are key issues in Louisiana’s economy. Table 1 provides Louisiana’s labor market data for important dates from the U.S. Bureau of Labor Statistics. These dates are December 2007, when the Great Recession started; February 2020, when the last expansion peaked before the COVID-19-related shutdowns; April 2020, when the shutdown recession ended; and September 2023, for the latest data available. The unemployment rate would be 4.9% if Louisianans hadn’t left the state since pre-COVID. The unemployment rate is calculated using data from the household survey and isn’t a great measure of the labor market. This is because unemployment in the numerator and the labor force in the denominator are volatile measures as people enter and exit Louisiana and the labor force. Considering data from pre-COVID to compare with the Governor’s statement, the working-age population is down by 36,329 to 3.5 million. Even though the labor force is up 1,566 since then, the many people who have left the state keep the unemployment rate lower than otherwise. If we include the departed population in the labor force and unemployment, the unemployment rate would be 4.9%, substantially higher than the reported 3.3%. Moreover, if the working-age population hadn’t declined, the labor force participation rate would be 59.3% instead of the 58.9% rate today. Louisiana’s employment has not increased for 30 consecutive months. While the Governor is correct that there have been about 280,000 jobs since pre-COVID, there have not been “30 consecutive months of job growth.” The payroll survey shows that nonfarm employment is up 270,300 and the household survey shows that employment is up 295,065 since February 2020. There was an increase in nonfarm employment by 8,900 jobs in September (6th most in percentage terms of any state). But this was after cumulative losses of 3,600 jobs during June and July for an increase of just 18,100 jobs over the last four months. Over the last 30 months, there have been seven months with declining net jobs in the payroll survey and nine months with declines in the household survey, which has had four straight months of declines for a total of 17,564 fewer people employed in that period. So, Louisianans have actually been struggling over the last 30 months. Louisiana will add a projected 80,000 more jobs over the next two years, indicating slower job creation. Considering nonfarm employment over a longer period, it is up by 46,000 jobs from a year ago (20th most in the country) for a 2.4% increase (12th fastest). This would result in 92,000 jobs added over the next two years if this pace continued, but the Governor says one projection is just 80,000 jobs added over that period, indicating slower job creation. Also, nonfarm employment is down by 13,700 jobs since February 2020 (one of only a few states that have not regained lost jobs since then). Jobs in the private sector increased by 520 last month to 1.66 million, and government employment increased by 8,300 jobs to 320,500. There is growing weakness in the labor market, with some job losses and average weekly earnings not rising as fast as CPI inflation of 3.7% in many industries (Figure 1). Another weakness is economic growth. Table 2 shows how the U.S. and Louisiana economies performed since 2020, as reported by the U.S. Bureau of Economic Analysis. The steep declines were during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered most. Figure 2 shows how the increase in real GDP in Louisiana of +1.4% in Q1:2023 ranked 31st in the country to $289.9 billion, after an annual decline in economic output by -1.8% in 2022 which was the second worst in the country. The BEA also reported that personal income in Louisiana grew at an annualized pace of +6.2% (ranked 27th) to $258.5 billion in Q1:2023 (above +5.1% U.S. average). There was personal income growth of 0.0% in 2022, ranking 50th of the states. Compared with neighboring states based on several measures there continue to be major concerns in Louisiana (see Table 3). Bottom Line: Louisiana’s economy is weak when it comes to the labor market and economic growth and when compared with other states. Bold, transformational reforms can unleash the potential of Louisianans and make the state more competitive.
Originally published at Pelican Institute. |
Vance Ginn, Ph.D.
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