Effects of Hurricane Katrina in New Orleans - Aftermath - Economy

Economy

Prior to Katrina’s landfall in 2005, the economy of New Orleans relied heavily on its usefulness and income derived from being a port city. The population grew and the economy peaked in the late 19th century. However, in the recent years, after rapid industrialization and the development of faster methods of transporting goods, the economy of New Orleans has been in a steady decline. As a result, New Orleans came to rely on three major industries for economic revenue: transportation, entertainment, and public services. However, after Katrina’s landfall, these sectors, including the overall economy, were reduced and heavily affected by the natural disaster.

After the hurricane, the labor force diminished and wages decreased by staggering amounts. In July 2005, 9,592 people applied for unemployment services and the payroll of metropolitan firms declined by 13.6% between July 2005 and July 2007, indicating an estimated loss of 70,000 jobs. The sectors most affected were service-related industries, fluctuating with the population. The only sector to truly thrive after landfall was construction, which was in high demand to make needed repairs and rebuild destroyed homes.

In the first initial months following Katrina, the labor force reduced faster than the demand and unemployment rates skyrocketed. However, as of September 2006, the unemployment rates have never fallen below national average, indicating improvement. In the second quarters of both 2005 and 2007, the firms' wages were increased by 21%, twice more than national increases, indicating even further improvement, although the gains were varied across the sectors.

There have been some suggestions concerning the usage of natural capital in order to further aid New Orleans’ economy. One such is that, as opposed to rebuilding on flooded lands, restoring acres of wetlands to profit from the economic wealth. The Mississippi delta provides the United States with one of the largest fisheries and the most important flyway terminus, enabling New Orleans to profit from these ecological industries. Furthermore, by increasing the wetlands, it would help create a natural barrier that could aid New Orleans in future storms. It is estimated that if New Orleans were to restore 1,700 square miles (4,400 km2) of wetland lost prior to 2005, the natural capital would be worth an estimated $6 billion/year, or $200 billion at the present value. While New Orleans has made numerous efforts in rebuilding their economy, and has been successful with tourist-attracting events such as Mardi Gras, the natural capital provided could further assist the city in returning to its pre-Katrina wealth and economy.