Last year, I took a late night tumble into a spreadsheet rabbit hole and landed on a disturbing and overlooked problem: Around $10 billion went missing from Lafayette’s economy between 2012 and 2016. That figure was somewhat imprecise, targeting a wider area than just Lafayette Parish. New county-level economic data (or parish-level, in our case) from the federal government paints a scarier and more precise picture.
Out of the 3,113 counties across the entire United States, Lafayette Parish’s real GDP growth (more on that in a minute) ranked 2,950th from 2012 to 2015. That puts us in the fifth percentile; in other words, 95 percent of America did better than us over these years.
To make sure we all have the same understanding of what this news means, let’s define a few of these terms:
Gross Domestic Product (GDP) – The estimated total sum of goods and services produced in a given area over a period of time.
Real GDP – A variation on GDP that factors in inflation and the value of money.
Growth of Real GDP – The pace an economy grows or contracts, described as a percentage. So if, adjusted for inflation, an area’s GDP increased, the percentage would be positive. If it decreased, the number would be negative.
In Lafayette’s case, our parish’s real GDP “grew” -3.3 percent from 2012 to 2013, -2.8 percent from 2013 to 2014, and -5.7 percent from 2014 to 2015, the beginning of the most recent oil price collapse.
Observant readers may notice that the parish’s GDP started dropping two years before the price of oil fell. Some oil and gas industry experts tell me 2012 was the year fracking started taking off, which resulted in investment dollars shifting from drilling offshore to fracking onshore. In other words, our economy was heading into trouble even if oil prices hadn’t tanked.
Federal stats like these, which came from the Bureau of Economic Analysis, lag behind several years, so more recent county/parish-level data isn’t available yet. But if we return to the data I used to find that missing $10 billion, we can see that these numbers don’t even reflect rock bottom, as the GDP for Lafayette’s MSA (defined below) fell another $2.3 billion in 2016, or roughly 10 percent.
To keep us all on the same page, let’s quickly define that term as well:
Metropolitan Statistical Area (MSA) – The area of economic influence around an urban hub. In Lafayette’s case that encompasses all of Lafayette Parish but also Acadia, Iberia, St. Martin and Vermilion parishes.
Previously the most granular GDP data from the BEA was at the MSA level, making it hard to isolate Lafayette Parish’s performance. Aided by this new parish-level data, we can take a closer look. And the up-close view is ugly.
Lafayette Parish’s overall GDP ranks fourth in Louisiana, but the “growth” of our real GDP in 2015 ranked 53rd out of 64 parishes.
Lafayette Parish accounts for more than two-thirds of the GDP of the Lafayette MSA. So if the MSA’s GDP dropped by billions in 2016, it undoubtedly reflects a significant drop in the parish’s GDP as well.
To sum this all up, from the years 2012 to 2015, Lafayette Parish had the worst “growth” in the Lafayette MSA, was in the bottom 20 percent for growth in the state of Louisiana, and was in the bottom 5 percent for growth in the United States of America.
And again, these numbers still don’t include the biggest drop, from 2015 to 2016, when the fallout of the oil crash began to land. When these parish-level numbers are updated at the end of this year, Lafayette’s rankings will likely only worsen.
Thankfully, there are at least a couple of silver linings buried in the economic devastation.
First, in the fall, the BEA released MSA-level GDP data for 2017, which showed a slight uptick for Lafayette’s MSA from $21.5 billion to $22.1 billion. This was the first year since 2012 that our MSA’s GDP grew. While this increase was modest and wasn’t much more than the rate of inflation, it could be a sign that the economy’s finally stopped shrinking. Phew.
And second, when you look back at the MSA’s historical data, it shows that efforts to cultivate economic diversity have paid off. During the last major crash in the price of oil in 2002, the overall GDP of the MSA fell to around $13 billion. But after the 2014 crash, GDP hit a much higher floor at just north of $22 billion in 2016. That’s a more palatable rock bottom.
Here’s the problem: Hitting rock bottom doesn’t mean we have a clear path to rebounding. Even a more diversified economy is still at risk of stalling out in its recovery and never making it back to what it was just a few years ago.
The challenge Lafayette faces is that an economic downturn like the one we’re in risks creating a self-perpetuating cycle of disinvestment. As local fortunes decline, people start losing faith in their community, which makes them less likely to invest whatever time and capital they have locally.
The only way to break out of this cycle is to focus on fostering as much investment into Lafayette as we can. Investment in developing local real estate, in growing local companies, in starting new businesses locally, in prioritizing local philanthropic giving, and beyond. Simply put: We need to invest in Lafayette.
And we need a whole lot of that investment if we want Lafayette to not only recover the ground lost and to move from the bottom of this growth in parish-level real GDP list to the top. A thought experiment: To jump from the bottom 5 percent to the top 5 percent means going from shrinking 5 percent a year to growing about 9 percent every year. Given that our current parish GDP is probably around $15 billion, that means we need to add around $1.5 billion to our real GDP every year for the next three years.
Adding billions is daunting, and ultimately there aren’t easy answers to achieving it. But thinking in these terms is the only way to prompt a rise to the challenge.