The gist: Local and national analysts warn that 30% or more of the nation’s workforce could lose their jobs because of the economic freeze associated with the coronavirus. So long as oil prices remain low — a function of an international price war and a collapse in consumption — the Lafayette metro area could see as many as 60,000 people out of work over the next few months.
The immediate impact in Lafayette is expected to be 15-20% unemployment, according to LEDA CEO Gregg Gothreaux. In a radio interview last week, Gothreaux cited national figures that suggest unemployment could reach 30% locally. That would mean tens of thousands of people in Lafayette Parish and the surrounding metro area would be without work.
The St. Louis Federal Reserve Bank projected 30% national unemployment in the second quarter. James Bullard, president of the St. Louis Fed, said Sunday in an interview with CBS that the figure is a midpoint for the Fed’s estimates, which top out at 42%. Bullard also pressed that he does not believe that the national economy is in “freefall,” despite the staggering figures.
Lafayette could be hit worse than these national averages. The St. Louis Fed’s economists posted a blog last week analyzing which state had the highest percentage of jobs with high risk of unemployment. Louisiana ranked 8th. Out of the top 100 metro areas in the country, Baton Rouge had the 8th highest percentage of high-risk unemployment while New Orleans had the 25th. Lafayette wasn’t ranked because it isn’t in the top 100 metro areas by population.
Even if Lafayette outperforms the state and matches the national average, it would mean tens of thousands could be unemployed. Many jobless claims would reflect temporary unemployment as some companies have furloughed their workforce rather than committed to wholesale layoffs. Here’s a breakdown of the potential impact on the city, parish and MSA (Lafayette, St. Martin, Acadia, Iberia and Vermilion parishes):
|Total labor force||59,960||113,485||212,633|
|Unemployed, projected at 30%||17,988||34,045||63,789|
Making matters worse for Lafayette is the oil crash. The Louisiana Oil and Gas Association surveyed its members and found that if oil prices stay as low as they’ve been, member companies would be forced to reduce their workforces by 60-70% by mid-summer.
The oil and gas industry employs 12,800 people in the Lafayette MSA. That means another 9,000 people could be losing their jobs in our area. While some job losses in this industry are to be expected given national projections, LOGA’s survey results suggest the oil and gas sector in Louisiana could see double the overall unemployment rate. That means more than 5,000 additional people getting laid off in this industry above and beyond the national unemployment projections.
These projections don’t factor in the recently passed stimulus. The $2.2 trillion CARES Act signed into law in late March comes with $350 billion in financial assistance for the nation’s small businesses, largely defined as companies with 500 or fewer employees. Local banks expect massive participation as Acadiana’s companies line up for disaster funds or loans from the Payroll Protection Program, which offers forgivable loans to businesses that keep paying their employees. Bullard believes the federal stimulus is large enough to tackle the scale of economic losses caused by coronavirus. It’s not clear what impact it will have on Louisiana’s oil and gas sector.
But Lafayette’s already starting to see this oncoming tsunami of unemployment rising. According to data from LEDA, for the week ending March 22, Lafayette Parish saw 3,300 unemployment claims. That’s more than double the number of claims in the broader Acadiana region at the beginning of March. Gothreaux believes we’ll see a similar number for the week ending March 29. That means in just those two weeks, the total number of unemployed people will have grown 140% in the parish, from 4,704 to 11,300, which equates to an unemployment rate of 10%, the highest rate for our parish in at least the last 30 years.
It remains unclear when the pandemic will end and whether oil prices will stabilize favorably. Oil prices again dropped Monday morning as price negotiations between Saudi Arabia and Russia fell apart. The price war between the two countries has flooded the market with cheap oil at a time of low demand.
There is help on the way for those who are unemployed. The stimulus includes expanded unemployment benefits, increasing weekly checks by $600 for up to four months, which is especially impactful in a state like Louisiana where unemployment only pays for 20% of the salary lost. And there could be more government subsidies on the way.
The stock market rebounded today on projections that the worst impacts of the pandemic will end in the next few months and that the economy will start to make a comeback in the third quarter and beyond. The Dow Jones, S&P 500 and Nasdaq Composite all rose about 7% on data showing that new U.S. coronavirus cases are appearing to slow down.