EconSouth (Second Quarter 2006)
EconSouth (Second Quarter 2006)
Recovery Comes Slowly
The 2006 hurricane season began June 1. In Louisiana and Mississippi—the areas most affected by Hurricanes Katrina and Rita—where is recovery under way? Where is it elusive? Are plans for rebuilding being implemented?
In some areas of Louisiana and Mississippi, cleanup from 2005’s hurricanes is complete and rebuilding is under way. But in other areas, debris removal and demolitions continue and reconstruction is only just beginning. Some parts of the Gulf Coast remain much like they did nine months ago, littered with gutted homes and ruined cars—and devoid of signs of recovery.
Both Louisiana and Mississippi have made considerable headway in removing debris from public spaces, according to the Federal Emergency Management Agency (FEMA). Only 15 percent of the estimated amount of debris in Louisiana remains, while in Mississippi that figure is just 3 percent.
A different picture emerges of debris removal from private property. In Mississippi, only 3 percent of private debris remains, while in Louisiana the estimate is 86 percent. Private property demolitions in Mississippi are also well ahead of Louisiana—19 percent versus 94 percent (see chart 1) of structures awaiting demolition.
Why the large differences? Katrina completely destroyed homes and businesses along Mississippi’s coast via wind and storm surge, but in New Orleans the storm flooded homes, damaging but not totally destroying them.
The availability and affordability of flood insurance are also holding back progress in the Crescent City. People with damaged homes may be ready to repair or rebuild, but so much uncertainty surrounds the levee and floodgate systems, giving people pause.
Further complicating matters for New Orleans is that so many people who evacuated have not returned and, therefore, cannot help clean up. And they can’t return because they have no housing. Public officials cannot demolish damaged homes before the necessary legal process required for demolition takes place, and that process cannot occur without the property owners’ participation.
Economic pulse difficult to take
Estimating the level of economic activity in the most-affected metro areas is difficult. Common national measures, such as gross domestic product or consumer spending, are not measured at the level of a city by governmental statistical agencies. Other statistics, however, can provide a glimpse of activity.
Sales tax data. One can infer from sales taxes the level of consumer spending in a given location. The data may not be strictly comparable because of differences in tax rates and reporting requirements, but sales tax intake can be tracked to indicate patterns in spending.
In Orleans Parish, for example, first quarter 2006 sales tax revenues were 35 percent below first quarter 2005 levels, but they have increased steadily since then. In Jefferson Parish, sales tax revenue was up nearly 50 percent in the first quarter of 2006 compared with year-ago levels. (Some of this increase is attributable to spending that is displaced from New Orleans.)
Sales tax revenue increases are expected in the wake of natural disasters as consumers receive insurance proceeds and initiate repairs and replacement of lost goods. The situation in Orleans Parish is different because of the severe flooding and evacuations. Fewer consumers are living in the area, and fewer retail establishments exist. The fact that consumption is up in Jefferson Parish, which did not experience catastrophic flooding to the extent seen in Orleans Parish, is no surprise.
Sales tax revenues from affected areas along the Mississippi Coast are well up from year-ago levels. In Jackson County, sales tax receipts in March 2006 were up more than 60 percent from March 2005. In Harrison County, tax receipts were up 30 percent for the same period. Only in the less populated and heavily damaged Hancock County was the sales tax intake unimpressive, down just over 1 percent from March 2005.
Measuring the workforce. According to the Bureau of Labor Statistics’ (BLS) Establishment Survey, 204,700 people in the New Orleans metro area lost their jobs because of Katrina. Since then, establishments in the New Orleans metro area have added a net 24,200 jobs, mostly in leisure and hospitality, construction, and healthcare. No private sector industry is near the level of employment seen before the hurricane (see chart 2).
Another BLS measurement shows how dramatically the New Orleans workforce has changed. The Household Survey, which estimates the labor force and unemployment, shows the New Orleans-area workforce has declined by nearly 210,000 (or 33 percent) since the hurricane, yet the unemployment rate for the area is similar to its pre-storm level because the BLS recognized in December that many of the workers it was labeling as unemployed were no longer in the area. Such a large decline in the workforce makes it difficult for businesses to find staff. Taken together, the BLS surveys on employment reveal that although New Orleans has added jobs since the hurricane, very large and potentially permanent declines in the labor force make a full-employment recovery there tenuous.
In the Gulfport-Biloxi metro area, payroll employment has actually declined an additional 5,100 workers on net after losing 17,000 in September. However, a closer look reveals that nearly all of the post-September decline can be traced to additional job cuts in the leisure and hospitality industry. Many establishments—especially casinos—kept employees on payrolls in the immediate wake of the storm, but this industry experienced another round of layoffs last December.
The Household Survey for Gulfport-Biloxi is very different from New Orleans. The number of unemployed has decelerated slowly since September but is still well above pre-storm levels. As a result, the Gulfport-Biloxi unemployment rate remains elevated. In Gulfport-Biloxi, post-storm declines are largely associated with the leisure and hospitality industry. In other areas of the economy, employment is slowly coming back. In addition, labor force declines have not been as severe, making a full recovery in Mississippi likely.
Housing. Specific data on the housing situation are scarce, but some conclusions can be made based on available reports. In New Orleans, little new residential construction is evident. Permits for new multifamily residential construction have picked up in the New Orleans metro area but are still below pre-Katrina levels. Two parishes that experienced severe flooding—St. Bernard and Orleans—have reported no new single-family residential construction permits since Katrina. In Jefferson Parish, which was partially flooded, new permits are increasing and are near pre-storm levels. The level of repair work to existing homes being undertaken is more difficult to ascertain as repair permits, when required, are not publicly available.
Another indicator of housing activity is sales of existing homes. Existing home sales in Orleans Parish remained 24 percent below year-ago levels in April, but they have picked up in recent months, according to the New Orleans Metropolitan Association of Realtors. Sales in Jefferson Parish were running 36 percent above year-ago levels in April, but sales in St. Bernard remained nearly 80 percent below year-ago levels.
In Mississippi, permits for new single-family residential construction are picking up and are above year-ago levels in the three most-affected counties (Hancock, Harrison, and Jackson). Although damage is still apparent nearly everywhere, damaged structures are being repaired, demolished homes and businesses are being rebuilt, and new construction is under way all along the Mississippi coast.
Tourism. A major sector in both New Orleans and on the Mississippi coast is tourism, which has continued to suffer since the hurricanes. In New Orleans, 86 hotels were fully open at the end of April out of a pre-storm total of 143. Additionally, as of April, only 30 percent of eating establishments in Orleans Parish have been certified to reopen, according to the Louisiana Restaurant Association. In Mississippi, only three of nine major casinos have reopened. Economic recovery in these areas is tied to a rebound in tourism.
Renewing the infrastructure
In addition to the work on the New Orleans levee system, massive repairs to roads, rail, and port facilities continue in both Louisiana and Mississippi. Although some roads and bridges remain closed, substantial repairs have been completed to most of the damaged transportation infrastructure.
Repairs also continue on port facilities in New Orleans and Gulfport. In terms of tonnage processed, both ports are operating near pre-storm levels.
Planning for the future
New Orleans’ recovery largely depends on addressing the housing issue. Drawing evacuees back to the city cannot begin unless adequate permanent housing is available. To assist, Louisiana officials are planning a program called “The Road Home,” which provides financial assistance for homeowners to repair, rebuild, or sell their property.
In Mississippi, plans are farther along. In November 2005, the Mississippi Renewal Forum, a gathering of more than 200 community leaders and professionals seeking design options on rebuilding, issued a summary on rebuilding plans. The forum, part of Gov. Haley Barbour’s Commission on Recovery, Rebuilding, and Renewal, is led by Netscape’s former chief executive officer James Barksdale. The forum issued plans for each affected community along the Mississippi Coast. In May 2006, six months after the forum issued its report, participants continue to work with communities.
Both southern Louisiana and the Mississippi coast face a long road to recovery. While each area has unique and daunting hurdles to overcome, thoughtful planning and leadership are paving the way.
This article was written by Michael Chriszt, director of international and regional analysis for the regional group of the Atlanta Fed’s research department.