Lafayette’s current economic downturn, which began in 2014, has drawn natural comparisons to the oil bust of the 1980s. The general consensus is that today’s slump is not as bad as back then.
But new federal data on per capita personal income suggests that what we’re dealing with now may actually be worse.
Per capita personal income adds up all the income everyone in an area earns and divides it by the number of residents. Basically, it’s a measure of how much money everyone put in their pocket in any given year. What makes it particularly valuable as a metric of the health of our economy is that we have access to parish-level data going all the way back to 1969. And the Bureau of Economic Analysis just released figures for 2019 a few weeks ago.
So we can easily compare what happened during the last major downturn from 1985 to 1990 to the current one from 2014 to 2019:
Lafayette Economic Downturns — 1985 vs. 2014
% change in Per Capita Personal Income
Note that the graph normalizes the data so that relative performance of both time periods can be more easily compared.
What we see here is that as bad as it was in the ’80s, the first few years of this current downturn were actually worse in terms of the amount of money going into people’s pockets. More than 50% worse in fact.
And despite Lafayette’s economy starting to grow again the last few years, the recovery is happening at a much slower pace. At this point in the cycle last time, per capita personal income had already rebounded well past where it started. But in 2019 we still hadn’t caught back up to where we were in 2014.
Not only that, but Lafayette’s tepid growth is causing it to fall further behind its peers. In 2019, the growth of Lafayette’s per capita personal income ranked 57th out of 64 parishes in the state and 337th out of 384 metropolitan areas in the country. In other words, incomes are growing, but they haven’t been doing so fast enough to keep up with everyone else.
So before this year even started, Lafayette was struggling to regain the ground that was lost back in 2014 and maintain its economic competitiveness. And then 2020 happened. We won’t know for sure how big of a hit people’s incomes took until these numbers come out for this year next December. But I’d wager this number’s going to fall again, potentially losing all of the ground that had been regained since we last hit bottom in 2016.
What this all means is that in terms of the relative change to per capita personal income, the current recession is worse than the ’80s. This may be surprising to anyone who lived through the ’80s. Because based on the stories I’ve heard, it doesn’t seem like people are suffering as much now as they were back then.
But there’s an obvious reason for that: Lafayette is richer now overall. If Lafayette’s income had just kept up with inflation, it would have doubled over the last few decades. Instead it almost tripled. So even though people’s incomes have fallen more this time around, more people have more money to begin with, which could be helping to dull the acuteness of the economic blow.
It’s important to note that this measure of economic health paints with a broad brush that doesn’t capture the nuance of the lived experiences of people at different socioeconomic levels. Instead, it’s a snapshot of the overall health of the economy that doesn’t clearly delineate how the overall economic pain we’re experiencing is impacting people at lower or higher income levels.
The biggest driver of this downturn is obvious: the fall of our local oil and gas industry. In fact, the total number of oil and gas jobs in our metropolitan area has fallen every year since 2014. Altogether, we’ve lost more than half of those jobs, falling from 23,492 to 11,286. This downward trend has been tough on our economy as a whole, but it has had an especially deleterious effect on our area’s per capita personal income because these have historically been higher paying jobs. Not only that, but with the wealth this industry normally generates severely curtailed, there’s a lot less money circulating through other local industries like retail and restaurants, putting downward pressure on incomes in those jobs as well.
It’s undoubtedly a good thing that Lafayette’s economy is more diversified and that on the whole our community is richer and better positioned to survive a downturn. But just because some in Lafayette’s economy may not be suffering as acutely as they did in the ’80s doesn’t necessarily mean the downturn was worse back then. After six years, Lafayette’s income still hasn’t fully recovered. And we have a slog ahead of us into an even more uncertain future.