Louisiana Economy Forecasting Model

Two of the statistical models—a state-level model and a national model—are Bayesian Vector Autoregressive Models (BVARs) and the remaining models are single-equation autoregressive models.

Economists have used BVAR models to forecast state and national economic variables. Typically, these models have been found to forecast out-of-sample better than standard Vector Autoregressive (VAR) Models and to be very competitive with larger, more complex, more difficult to specify, and more costly to maintain structural models, often delivering more accurate forecasts. These models are described more completely on the Forecast Addendum page, linked below.

OPEN FORECAST ADDENDUM

The current forecasting model should be viewed as the first iteration in an ongoing process. Well-specified statistical models can predict accurately when the future is similar to the past. Of course, structural changes can make the future different from the past, and the quality of statistical model forecasts will deteriorate unless the model is adjusted to account for these changes. Consequently, it is necessary to revisit the specifications periodically as more data become available.

The forecasts we present are purely statistical and don’t reflect any subjective adjustments, which are left to the discretion of the forecast user. We provide the best estimate of the variable in each of the four quarters of the forecast (the red line in graphs of the forecast) and a forecast cone (the grey area) that reflects the relative accuracy of past forecasts for that variable at each forecast horizon. The cone “fans” out because the farther ahead we forecast, the less accurate the forecast, a well-known characteristic of economic forecasts.

In 2023, the Office of Management and Budget redefined the Metropolitan Statistical Areas (MSAs) of the U.S. MSAs are defined as territory containing one or more urban areas with at least 50,000 population and the area around the(se) urban area(s) that is(are) highly integrated both economically and socially with the urban area(s). The degree of integration is measured by commuting ties. The most recent release of employment data by the Bureau of Labor Statistics reflects the new MSA definitions.

Louisiana has a new MSA (Slidell-Mandeville-Covington), and some others like, for example, New Orleans-Metairie have been redefined. Consequently, the forecasting models for the old MSAs have been re-specified, and a forecasting model has been generated for the new MSA. The table below provides information on the territory included in each MSA.

Current Louisiana MSAs

For perspective about the Louisiana economy, it is instructive to compare employment, population, real GSP, real GSP per capita, and real GSP per worker in Louisiana to that in other states. Open the PDF addendum linked below to view an in-depth comparison.

View Economic Comparison Addendum

The quarterly forecasts of Louisiana employment are for total non-farm employment. This total includes both private sector and government sector employment. To better understand employment trends in Louisiana, the PDF addendum linked below provides historical information on the breakdown of total employment between private sector and government employment and then for specific sectors within the government and private sectors.

View Non-Farm Employment Addendum