Poised to Grow?
Analysts say New Orleans must pounce on business opportunities
Some might call it “counterintuitive” – the idea that in the midst of a national economic decline New Orleans could somehow be going in the opposite direction. Well, call it whatever you like, the fact is the local economy is edging upward even as our peers throughout the nation continue to stumble.
For several months, national headlines have made almost daily announcements of job cuts and profit declines. Layoffs by the thousands have been the stuff of press releases from some of the country’s largest companies.
Meanwhile in New Orleans, jobs have increased and likely will keep growing, according to the University of New Orleans Division of Business and Economic Research. In its 2008 year-end survey of local economic indicators, the division reported that during the first nine months of the year, total jobs in the nation fell by 0.3 percent. During the same period, the New Orleans metropolitan area added 11,700 jobs, for an increase of 2.3 percent.
“The last year in New Orleans reveals few signs of the economic turmoil suffered by the U.S. as a whole,” the UNO report stated.
Janet Speyrer, associate dean for economic research at UNO, says several factors are responsible for the relatively robust performance of the local economy. One is the city’s ongoing recovery from the 2005 flood. Money is continuing to flow into major infrastructure repair and rebuilding. Work totaling billions of dollars on area levees and flood control projects is still under way, with such big projects as the closure of the Mississippi River Gulf Outlet just getting started.
In addition, a great deal of infrastructure work continues that is unrelated to Hurricane Katrina or the subsequent flood. A big expansion of the National World War II Museum in downtown New Orleans is under way, for instance. Also, the large Federal City development on the West Bank, which will house various units of the U.S. military along with private commercial enterprises, is moving from design to the construction stage.
“And look how much work is going on for the widening of Interstate 10,” Speyrer adds.
Almost as important as what is going on in New Orleans is what is not happening here – a slew of home mortgage defaults. Many other U.S. cities “had a long-term bubble where home prices were going up too fast,” Speyrer says. As soon as the broader market softened, the price bubble deflated, existing home values declined and mortgage owners found themselves facing creditors’ demands for larger note payments.
While the local area experienced a spike of higher prices on existing homes immediately after Katrina, “our bubble was short-lived,” Speyrer says. New Orleans area homeowners generally are not up against the kind of credit problems that have reached epidemic proportions in Florida, California and some other states.
The combined result of these circumstances is a fairly buoyant local economy, when judged by national standards. “There are only a few sectors where the New Orleans trend is not more positive than the U.S. trend,” Speyrer says.
Not surprisingly, construction leads job growth in the local area. Employment in that sector increased 6 percent in the first three quarters of 2008. Jobs also were up significantly in health care and social assistance.
While the indicators paint a picture of economic strength, Speyrer says it’s important to put the data in context relative to the last several years. Population and employment took big hits from Katrina and the flood. The good news, she says, is that both population and jobs in the metropolitan area have reached 87 percent of their pre-Katrina levels.
The less rosy news is that growth in both categories has slowed, and while the upward motion is expected to continue, growth in the next few years will come at a slower pace. Certainly, as long as the nation’s economy remains sluggish, the New Orleans tourism industry can expect the same.
What the city needs now is “successful efforts in economic development” to help build momentum in job growth and position New Orleans for post-recession opportunities, Speyrer says.
A local agency that says it’s focused on that goal is Greater New Orleans Inc., an agency whose mission is to accelerate business and work force development in a 10-parish area.
The agency has identified several sectors as holding the best opportunities for local business expansion. Because the sectors already have a local foundation and are likely to benefit from national business trends, these areas are seen as good targets:
Advanced aerospace and defense manufacturing. This sector encompasses large employers that already operate in the local area, including Northrop Grumman/Avondale Shipbuilding and Bollinger Shipyards and Lockheed Martin Space Systems and Boeing Co., both of which are currently fulfilling large contracts at NASA’s Michoud Assembly Facility in eastern New Orleans.
Creative media and design. The wide-ranging activities in this category include software design, film production, music recording, interior and graphic design, advertising, architecture, urban design and historic preservation. The agency sees growth potential in these areas through continued use of incentives, such as the tax credits that have been used to attract the film industry, and expansion of educational offerings relevant to these businesses.
Energy, petrochemicals and plastics. Not only will worldwide demand continue in these areas, but the metropolitan area remains positioned to accommodate the needs of these industries, the agency says. Local assets include proximity to oil and gas resources and pipelines; easy access to port and railroad services; universities that offer relevant technological research and training; and low utility costs.
International trade, logistics and distribution. To capitalize on the large volume of cargo that moves through area ports and across area rails and highways, the agency urges the development of more local facilities that can process or otherwise add value to some cargoes, thus not only enhancing the existing trade but increasing local jobs related to it.