On Aug. 29, 2005, the catastrophe that was Hurricane Katrina dealt a crushing blow to the Gulf Coast. Two years later, how is recovery progressing, and how close is the region to normalcy?
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Hurricane Katrina, the costliest and one of the deadliest hurricanes in U.S. history, killed more than 1,900 people and displaced 400,000 more. Estimates from the Insurance Information Institute show that Katrina caused $41.9 billion in insured property damage, nearly twice as much as the second-costliest storm, Hurricane Andrew, in 1992. The second anniversary of this disaster is a good time to evaluate how far along the affected areas are on the path to recovery.
Finding the funds to rebuild
Rebuilding the affected Gulf Coast is a massive undertaking. According to White House statistics, through the first quarter of 2007 the federal government has provided more than $110 billion in resources to the Gulf Coast. More than $85 billion of this total has been promised, and more than $53 billion has been spent. In addition, U.S. citizens have contributed more than $3.5 billion in cash and in-kind donations to relief and recovery efforts.
But even with this flow of financial aid, problems remain, most of which center around insurance issues. Obtaining insurance and skyrocketing insurance rates continue to place an enormous burden on residents and businesses, leading to the delay or termination of some rebuilding plans.
Repopulation happening, but slowly
One of Katrina's most heartbreaking effects was the displacement of hundreds of thousands of people from the Mississippi coast, south Louisiana, and New Orleans. The Big Easy had to deal not only with category 3 winds and storm surge but also with unprecedented flooding through breached levees that kept parts of the city under water for weeks.
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The U.S. Census Bureau estimates that the total population of Orleans Parish, which contains New Orleans, fell from just over 437,000 in July 2005–the month before Katrina struck–to 158,000 in January 2006, a decline of more than 63 percent. Census estimates show a rebound to 215,400 by July 2006, but that figure is still less than half the pre-Katrina population. St. Bernard Parish saw its population plummet from 64,400 in July 2005 to just below 4,000 by January 2006, a drop of nearly 95 percent. By July 2006, according to Census estimates, the population had rebounded to 15,300, still less than a quarter of prestorm levels.
Although the Census Bureau has produced no official population estimates since July 2006, data derived from the U.S. Postal Service and published by the Brookings Institution and the Greater New Orleans Community Data Center suggest that repopulation has continued. For example, active residential postal deliveries are nearly 66 percent of pre-Katrina levels in Orleans Parish and 36 percent in St. Bernard Parish.
Along the Mississippi coast, population displacement was not as extensive as in the New Orleans area, but it was still significant. The three Mississippi counties that border the Gulf of Mexico (Hancock, Harrison, and Jackson) saw their collective population drop from 367,000 in July 2005 to 317,000 in July 2006, according to the most recent Census estimates, a net decline of more than 13 percent. Population in those counties rebounded to 343,000 by July 2006.
Housing remains the key
Rebuilding damaged housing and infrastructure is essential to the repopulation process. In New Orleans, this task was made more difficult because flooding damaged thousands of homes but didn't destroy them. Through June 2007, the U.S. Army Corps of Engineers had demolished a total of 3,741 buildings in Orleans Parish that were deemed unsafe. In June 2006 this number stood at only 185, so the pace of demolitions has accelerated. Permits for residential construction on existing structures, which includes repairing and rebuilding damaged homes, reached a cumulative 58,270 in April 2007 from just under 30,000 in April 2006, indicating that damaged buildings continue to be mended.
Just as important, the issuance of permits for new residential construction has accelerated. Year to date through the second quarter of 2007, the Census Bureau reports that total new residential permits stood at just under 1,700 units for Orleans Parish, well up from the year-to-date level of 206 in the second quarter of 2006. The majority of these new units have been multifamily, but new residential permits for single-family structures were also well above year-earlier levels.
Permit growth for new residential construction is also strong along the Mississippi Coast. Total new units authorized were up 30 percent through the second quarter of 2007 compared with the same period a year earlier.
| Employment in New Orleans and Gulfport-Biloxi-Pascagoula MSAs, 2005–07 |
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| Source: U.S. Bureau of Labor Statistics |
Employment still working to recover
In addition to needing a place to live, new and returning residents need a place to work. Employment data from the U.S. Bureau of Labor Statistics (BLS) show that both the New Orleans metro area and the Mississippi Gulf Coast are slowly adding jobs. In the New Orleans metropolitan statistical area (MSA)–which includes the parishes of Orleans, Jefferson, Plaquemines, St. Bernard, St. Charles, St. John the Baptist, and St. Tammany–total employment stood at 503,000 in June 2007. This number is still more than 100,000 below pre-Katrina levels but up 77,200 from the poststorm low of 425,800 recorded in October 2005 (see the chart).
Most of the job losses in New Orleans have occurred in services industries and government. Service jobs fell by more than 144,000 in the two months following Katrina's landfall, and roughly half of those have returned. The leisure and hospitality industry was particularly hard hit as tourists and business travelers stayed away. Just over 26,000 government jobs were lost immediately after the hurricane, and a further 4,400 jobs have been shed in the government sector since October 2005. Construction employment is up a net 2,800 from pre-Katrina levels, while manufacturing is down 3,100, according to the BLS.
In Mississippi, total employment in the Gulfport-Biloxi MSA (which includes coastal Hancock and Harrison counties along with Stone County) and the Pascagoula MSA (George County and coastal Jackson County) fell from 171,900 immediately preceding Katrina to a low of 146,900 in January 2006. Since then, total employment in the two MSAs has recovered significantly to 163,200 jobs in June 2007 (see the chart).
As it did in New Orleans, employment in construction and manufacturing along the Mississippi Coast rebounded quickly from the storm. Construction jobs were up 3,600 in June 2007 from August 2005 levels, and manufacturing jobs were down only 2,000. Employment in the service sector, especially in the leisure and hospitality industries, remains well below pre-Katrina levels. Net services job losses stood at 10,300 in June 2007. However, largely because of the ongoing recovery in the gaming sector, service industries along the Mississippi Coast have added over 16,000 jobs during the past 18 months. Government employment has remained fairly stable over the past two years.
Consumption gains ground
Local sales tax collections are an important gauge of an area's economic vibrancy because they serve as a proxy for overall consumer spending. In New Orleans, for example, general sales tax revenue averaged $11.4 million per month in the first half of 2005, according to city data. Revenues fell to just under $6 million per month in the second half of the year. In the first half of 2007, average monthly sales tax revenue was $9.7 million, indicating that consumer spending is recovering.
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In Harrison County, Miss., which includes the cities of Gulfport and Biloxi, sales tax revenues dropped significantly in September and October 2005 but quickly recovered. Data from the Mississippi State Tax Commission shows that in the first half of 2007, sales tax revenues were running 15 percent higher than in the first half of 2005.
To be sure, both in New Orleans and Harrison County, a portion of these revenues is most likely related to sales of replacement goods for items damaged or destroyed by Katrina and were at least in part purchased with insurance funds. Anecdotal evidence gathered through business contacts indicates that the majority of these types of sales were recorded in late 2005 and early 2006, making comparisons between first-half 2005 and first-half 2007 more reflective of the general levels of economic activity before and after the storm.
Tourism making the long trip back
In tandem with the revenue that gaming generates, tourism is key to the economies of both New Orleans and the Mississippi Coast. The Crescent City traditionally attracts millions of people, including conventioneers. In Mississippi, the rapid growth of the gaming industry along the coast has been an important regional economic generator. As the employment statistics show, the leisure and hospitality industries were particularly hard hit by Hurricane Katrina.
In New Orleans, conventions were canceled and have been slow to come back as alternate venues have become established. Regular tourists who came in droves to experience the city's unique attractions have also been slow to return. City of New Orleans data show that tax revenues from hotels and motels, also referred to as "bed taxes," remain well below pre-Katrina levels. Through the first half of 2007, hotel-motel tax revenues were down nearly 25 percent from the first half of 2005. Arrivals at Louis Armstrong New Orleans International Airport were down 28 percent in the first half of 2007 compared with the first half of 2005 but are increasing steadily from post-Katina lows.
In addition, New Orleans's July 2007 State of the City report said that this year's Mardi Gras festivities drew a crowd of 800,000, topping last year's crowd of 700,000 but still shy of pre-Katrina numbers of around one million. Harrah's New Orleans is on pace for its best year ever, with gaming revenue 13 percent higher through the first five months of 2007 compared with the same period in 2005.
The recovery of the Mississippi Gulf Coast gaming industry is reflected in growing revenues. Gaming revenues were off just 2 percent in the first half of 2007 compared with the first half of 2005, according to data from the Mississippi State Tax Commission. Casino and resort reopenings have stimulated a rebound in patron numbers and employment levels for the Mississippi Gulf Coast's leisure and hospitality industries, but employment has not yet reached pre-Katrina levels. The July opening of the Hard Rock Casino in Biloxi and the recently completed addition to the Island View Casino Resort in Gulfport position the Mississippi Gulf Coast market for continued recovery.
Both New Orleans and the Mississippi Gulf Coast continue to recover from one of the nation's worst natural disasters. Though the recovery is slow and tentative, and anything resembling a full recovery is still years away, the areas laid low by Hurricane Katrina are dusting themselves off and getting up off the mat.
This article was written by Michael Chriszt, director of international and regional analysis for the regional group of the Atlanta Fed's research department.