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Buzzy Heroman isn’t bracing for any recession.

Despite being in a business whose mainstays are gasoline [going up] and disposable income [going down], the Billy Heroman’s Flowerland owner has just sprung for a new software to streamline delivery, display shelves and tables.

It isn’t that Heroman isn’t feeling the pinch. His last shipment from California had a 34% freight fee, and brilliant blossoms flown in from South America routinely now have three or four surcharges⎯and that’s on top of fatter freight fares and higher prices.

His own drivers make deliveries from Zachary to Gonzales twice a day, sometimes in vans that get no better than 10 miles to the gallon. And his greenhouses cost him $10,000 in fuel this winter.

Even so, the man at the helm of one of the city’s oldest retailers isn’t hunkering down. He’s convinced the economic storm moving in over much of the rest of the country won’t rain on Baton Rouge.

“I would not want to say that Baton Rouge is recession-proof,” Heroman says. “But 52 years in business has taught me that Baton Rouge is about as close to recession-proof as it gets right now. I’m not holding out for a rainy day.”

The ‘R’ word

He’s not alone in that sentiment. Look no further than the morning paper or the evening news for predictions that the nation is in for a pounding from inflation, stagflation, recession or some other gloomy-sounding tempest. The housing market is tumbling, gas prices are soaring, jobs are disappearing, credit is in a crunch and the dollar is weak.

One quarter of decline in gross domestic product down; one more to go.

But economy watchers, while admitting those who call Baton Rouge home may dine at Sullivan’s a little less often and wait months longer for their homes to sell, insist we need not fret about the “R” word, at least not right away. Analysts surmise the region is protected by a number of unique factors; some of them old familiar standbys [think oil-and-gas economy, plentiful government jobs], some of them new [post-hurricane rebuilding].

“I do think if any place in the country is going to be able to avoid recessionary conditions, it’s going to be here,” says Peter Ricchiuti, assistant dean of the A.B. Freeman School of Business at Tulane University. “It’s sort of like being on Mars. We’ve always run countercyclical to the national economy, but current conditions make that even more likely. No one will say that a recession is good for us, but this is certainly a good place to hide.”

In fact, a recent Baton Rouge Area Chamber survey suggests regional business leaders are nearly as bullish on the economy as they were a year ago. Some 90% of those who took part predict growth of 5% or more in 2008, compared to 92% who felt that way last year. And 42% anticipate it will arrive in double digits.

In East Baton Rouge Parish, sales tax receipts were up 28% since 2004 and the assessed valuation of the parish grew 7% in 2007. BRAC forecasts 5,000 to 10,000 new jobs in the region this year, thanks in part to two new call centers [Direct General and Staples] and 12 new hotels. Meanwhile, unemployment in Louisiana remains below the national average, which is considered a historical rarity.

Rigs and hammers

Economists point to two primary factors likely protecting the area from the effects of a recession right away: Oil and post-hurricane rebuilding.

While $100-a-barrel crude is bad news for consumers, it’s a windfall for the petroleum industry, which makes its home in south Louisiana. Retail prices are expected to approach $4 a gallon by spring. Analysts look for global demand to rise by 1.4 million barrels a day this year, which may help keep prices up.

BRAC interim president and CEO Steven Grissom says the strong concentration of petrochemical and refining industries⎯many of which are projecting immediate upgrades or expansions⎯will provide “a fairly strong stimulus for the Baton Rouge economy for the next several years.”

“The effects of the petrochemical industry stimulate the whole southern part of the state,” says Dek Terrell, director of the LSU Division of Economic Development. “While the rest of the country sees an increase at the pump, we’re seeing an increase at the pump, too, but we’re also seeing an increase in state government revenues and a strong oil industry in parts of the state.”

Louisiana now has 6,000 more jobs in mineral extraction than it did before the storm, notes Greg Albrecht, an economist in the Louisiana Legislative Fiscal Office.

The region also has a buffer in the billions of dollars that flowed in to rebuild communities after Hurricane Katrina’s destruction, as well as the massive incentive program known as the Gulf Opportunity Zone. More than $6.1 billion in construction projects are under way or planned for the Baton Rouge region, making construction a major player in the area’s economic future. “Because of GO Zone, there is an enormous amount of construction under way or planned,” LSU economist Loren Scott says. “In the past, a good year was $750 million. That is going to provide an additional buffer for our economy that other areas of the country will not have.”

Ricchiuti says south Louisiana is attracting carpenters from other parts of the country that once enjoyed building booms of their own⎯Nevada, Arizona and California⎯because “it is the last strong place for construction. There’s a ton of work still to do.” And financial incentives, he adds, mean there’s “still an awful lot of cheap money floating around.”

Walter Monsour, chief administrative officer for the city/parish, says the Green Light Plan to improve transportation and streets and the sewer rehabilitation project combined are expected to pump $1.6 billion into the local economy over the next 10 years. Says Monsour: “There’s some insulation there.”

Other indicators

A weak dollar is good news for the region’s port. The dollar has fallen to $1.4967 against the euro, its lowest level since the creation of that currency, and is trading at near long-term lows against other major world currencies like the Canadian and Australian dollars.

Ricchiuti says that south Louisiana ports in general⎯the largest in the world in terms of tonnage⎯are exceeding pre-Katrina levels. “The ports are doing better than they ever have because U.S. exports are very, very strong right now,” he says. “We’re expected to see 15% to 20% increases in exports over the next two or three years.”

Being the state capitol gives Baton Rouge some additional protection. State and local agencies⎯together with LSU and Southern⎯constitute the region’s largest employer. Terrell says the state isn’t likely to be hit hard by a recession, given strong oil-and-gas revenues, although Gov. Bobby Jindal already has implemented a hiring freeze and nixed funding for some positions.

“Those institutions and departments are likely fairly well insulated from the national economy,” Grissom says. “But they are more exposed to the state revenue situation, which is affected by it.”

Also buffering the region from the national recession is its lack of a significant durable goods manufacturing industry. Instead, Baton Rouge is a key manufacturer of chemicals and gasoline, which consumers must buy even when they don’t have much money to go ’round.

And there are indications those industries are going strong. This year, Westlake Chemicals begins a $300 million expansion in Ascension Parish and Shintech a $900 million expansion in Iberville Parish. Placid Refinery begins a $300 million expansion to boost production at its Port Allen facility. Grissom predicts those projects and others like them will provide “a fairly strong stimulus for the Baton Rouge economy for the next several years.”

“If you thought you were going to lose your job or if you did lose your job, what’s the last thing you’d think about buying?” Scott asks. “It’s a house, a car, an appliance⎯durable goods. If you look at the Baton Rouge economy, we are not a durable goods manufacturing economy. We are primarily chemicals, gasoline, non-durables. So historically, when there’s a national recession, our hit is not as long and not as deep.”

Now for the bad news

Despite all of those havens, the Baton Rouge economy still could have its share of dark clouds. Analysts warn the region isn’t completely sheltered from the effects of a recession, and may simply experience them further down the road.

“Any way you go about it, there’s going to be a national slowdown,” LSU economics professor Jim Richardson says. “The question is, ‘Is that going to affect Baton Rouge?’ The answer is, ‘Certainly it can.’ Baton Rouge is going to have some insulation. But it will affect homebuilders, construction and some industry. Right now, to say, ‘We’re insulated,’ is an overstatement. To say, ‘We’re cushioned,’ certainly.”

For one thing, high-flying gas prices bring in more revenues for the petrochemical industry and state government, but likely mean less consumer spending in other areas. “The person at the pump is forced to redirect their expenditures,” Richardson says. “They may save less, they may spend less on dry cleaning, or give less to the church, or not eat out. It will show up in some way. They’ll still be spending the same amount, but more of it with certain industries.”

Albrecht also predicts that a national recession eventually will drive energy prices down, given that the United States consumes 25% of the world’s oil supply. Oil demand in this country grew by just .4% in 2007 and is expected to be flat in 2008. Any slowdown in the petrochemical industry eventually will find its way to Baton Rouge’s oil and gas sector, touching everything from fabricators to drilling rigs. And sales taxes take a tumble.

“My gut feeling is that it’s going to bleed over to us,” Albrecht says. “Eventually, a recession weakens energy prices because the U.S. is a major energy buyer. As energy prices fall off, all the benefits we got from the boom begin to end. We begin to lay off people, drilling slows and we experience our recession on the tail end of the national recession. We’re countercyclical to the rest of the world.”

But even if oil prices settle at $70 a barrel, he notes, “that’s still a hell of a good oil price for us.”

Also uncertain is how long the construction boom can last, given that Louisiana as a whole isn’t gaining new population. In particular, analysts aren’t certain whether the region soon might start feeling the effects of residential overbuilding. Homes sales in the Baton Rouge area plunged nearly 32% in December, and volume sales were down 33.6%. Ascension Parish took the biggest hit, with sales falling 44% and volume 45%. Realtors, however, insist those numbers are just the market correcting itself after the post-hurricane surge.

On the commercial side, Grissom notes that some of the GO Zone incentives driving increased investment in the region will start phasing out over the next year. Albrecht suspects south Louisiana’s post-hurricane boom is over, and the state is about to settle into a long, drawn-out recovery that makes it more vulnerable to a national recession.

Also troublesome is the effect a slowdown might have on south Louisiana’s tourism and convention industry. Says Ricchiuti: “If companies start pinching back, there may be fewer conventions, or they may send fewer people to conventions, and that industry is pretty vulnerable right now.”

Even so, Grissom is convinced that business-owner confidence presents the best picture of how the economy is likely to fare. He points back to the results of the recent BRAC survey. “If you look at how business owners are thinking about 2008, they’re almost as optimistic as they were in 2007,” he says. “There’s a lot of optimism, with solid projections for growth and revenues and hiring and capital expenditures. Those are fairly strong data points there.”

Heroman, for one, is determined to push back when the going gets tough. Two years ago, his company bought several Toyota Scions, which get better gas mileage than the old vans, to cut fuel expenses. His firm has also implemented new marketing strategies to remind customers of the pleasure of having fresh flowers in their homes. Hard work and a valued product, he’s convinced, will survive any recession.

But don’t rule out history, too.

“I couldn’t say we are insulated, but historically, Baton Rouge has not tracked the upswings or downswings of the national economy,” Monsour says. “That’s one of the stalwarts of Baton Rouge.”

Click here for an economic timeline from 1982-2008.