I had the privilege two weeks ago to host Jay Brinkmann, chief economist and senior vice president of research and economics of the Mortgage Bankers Association, at the Smart Growth Summit in Baton Rouge. Brinkmann spoke at two sessions; one looked at the costs/benefits of status quo versus growth and the other session was a discussion of the state and national economies. At a private lunch after the summit I asked him to address a question that I have heard asked many times recently: if Louisiana entered the recession later than other parts of the country, do we have more painful times ahead while the rest of the country recovers?
Brinkmann said that the answer depends on what Louisiana has to offer the rest of the country. To understand our economic destiny we need to know whether the rest of the country will buy our goods and services as the recovery progresses and at what price to determine what revenues we will generate. We also need to know if we are spending those revenues wisely as a state.
So what do we have going for us? While Louisiana has diversified somewhat from the dependence of the past, we still live and die by our petrochemical industries. The good news is that the country is still hooked on oil and gas and the chemical byproducts derived from those petrochemicals. To the extent that household consumption remains strong, we should be selling a good volume of product, albeit probably not in the hoped for $80 to $100 per barrel range.
We also have our traditional agricultural and fishing industries, plus the ports and shipbuilding, all of which are steady producers of state revenues. Not exciting producers with huge gains, but steady. And these days I’ll take steady over exciting. In addition, there is that influx of federal and insurance company funds after the storms, feeding the construction industry for however long that lasts.
I am no economist, but my layman’s view of our prospects as the country comes out of recession is that we have basic and fundamental strengths and will continue to chug along like a push boat on the river. We will have setbacks such as state government’s budget deficit and segmented losses of employment, but we will adjust and have gains in other areas. If I understand Brinkmann’s comments, there is no particular reason to believe that we will experience a deeper or longer local recession as the rest of the nation recovers.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
