Dec 02 2010


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Economic Costs of Hurricane Katrina

By: Brendan Moore

This image is from the FEMA Photo Library.

Could you imagine losing your entire home along with all of your belongings in an instant? This would be absolutely devastating. Now imagine losing all of your personal belongings along with the city in which you have made your home. Thousands of people were forced to endure this very tragic scenario after the immense storm surge of Hurricane Katrina violently struck New Orleans in 2005. In the aftermath of the storm, about 80 percent of the city was flooded. Katrina destroyed the levees New Orleans depended on, further flooding the city. As a result, the entire city was in shambles, inundated with looters, homeless people and evacuees. The lives of New Orleanians were not the only things devastated after this immense hurricane; the local and national economies were also tremendously affected. Ultimately by examining the local and national economic situations before and after Katrina, one can accurately predict the lasting effect left by Katrina.

This image is from the FEMA Photo Library. Photo by: Jocelyn Augustino

In order to fully understand the impact Hurricane Katrina had on the economic status of New Orleans, it is important to know the culture and economic forces driving the city. One of the city’s major ways of securing a stable economy is the fact that the city is a major tourist attraction for the United States. As regional commissioner, Michael Dolfman, reminds us “New Orleans is, or at least, among the most visited cities in the United States. Besides the attraction of its French Quarter, its internationally renowned restaurants, and its first-class accommodations, a series of celebrations, including Mardi Gras, the New Orleans Bowl and the Sugar Bowl have drawn in tens of thousands of tourists” (2005).Another major economic stimulator for New Orleans is the Port of New Orleans. This port is in charge of major exports to other regions of the country and the world. The most important export is the petroleum products that are mined in the Gulf of Mexico. Also the port handles imports from around the world that also include petroleum and chemicals. When Hurricane Katrina struck the city of New Orleans, it not only destroyed the majority of homes, but it also destroyed a majority of the industries. After the storm the city was basically isolated from the nation. There were no goods going in or coming out of the city. This caused a shortage of petroleum being exported from New Orleans thus causing major gas shortages throughout the entire southeast United States. “A recent article estimated damages in excess of $200 billion, making Katrina one of the most economically costly hurricanes ever to strike the United States” (Dolfman 2005).

This image is from the FEMA Photo Library. Photo by: Jocelyn Augustino

What makes Katrina unique from other hurricanes to cause damage to the United States is that Katrina was not strictly local disaster. It completely destroyed the nation’s energy infrastructure as well as shut down one of the nation’s main ports. “The Gulf accounts for 17% of the country’s refining capacity and one-quarter of its daily crude output” (Coy 2005). With the Gulf accounting for this abundance of crude oil about 92 percent of oil production was shut down for weeks after the storm. With the nation’s prices for oil and gasoline already at an all time high, this only further raised the price to over three dollars. Gas stations all around the United States were completely selling out to meet the demand. Gasoline was not the only problem facing the nation. The city of New Orleans alone faced a total job loss of 95,000 during the first ten months after the hurricane. According to Dolfman, “lost wages over the 10-month period from September 2005 to June 2006 was about $2.9 billion” (2005). The sector of labor that was hit the hardest from loss of jobs was tourism. This sector consisted of approximately 22,900 lost jobs and 382.7 million dollars in lost wages alone. Though New Orleans’ rate of employment was seriously crippled by Katrina, the nation as a whole was not as affected. According to economist Emy Sok, “the effects of the hurricanes were not discernible in the major labor market indicators from the household survey” (2006).  Therefore employment was not

President Bush Arrives in New Orleans after Hurricane Katrina by William Townsend USN, 2005 (DOD 051011-N-9274T-116)

nearly as affected on the national scale as the employment on a local scale. What was affected equally was the inflation of prices for resources needed throughout the country. Those who took the hardest hit were likely those who could not afford it and were most vulnerable to federal interest raises in energy and gas.

Although the United States government under President George Bush was very harshly criticized for the slow response in getting relief efforts under way in New Orleans, the government did install multiple rescue operations. Reacting to the tens of thousands of people who were evacuated and the estimated 1,400 dead due to the storm;

Bush asked congress to support recovery aid needs. According to Dolfman congress obliged to these requests, “the 109th Congress enacted two supplementary appropriation bills totaling $62.3 billion for emergency response and recovery needs” (2005). President Bush also promised 2,000 dollars immediately to homeless evacuees housed in a number of different temporary homes (Walsh 2005). The Superdome dome in New Orleans was used to house over 30,000 evacuees as well as 25,000 in the Astrodome in Houston, Texas.

Looking back, the economy of New Orleans was greatly affected by Hurricane Katrina which made landfall August 29, 2005. The city was completely destroyed leaving tens of thousands of people homeless and a thousand lifeless. The most devastating blow to the economy was the amount of job losses and price inflation for gasoline, energy and resources throughout the United States. The federal money spent to aid recovery to the city along with reconstruction also had a major impact on the economy. The economic stature of New Orleans has made a significant recovery since September, 2005 but as gas prices are still high and families still relocated the effects of Katrina will still be felt for years to come.

Works Cited

Anderson, S. (2005). More pain, but no freefall. ABA Banking Journal97(12), 52. Retrieved Nov. 4, 2010, from Business Source Premier.

Coy, P., Foust, D., Woellert, L., Palmeri, C., & Reed, S. (2005). Katrina’s Wake. BusinessWeek Online, N.PAG. Retrieved Nov. 4, 2010, from Business Source Premier.

Dolfman, M., & Bergman, B. (2007). The effects of Hurricane Katrina on the New Orleans economy.Monthly Labor Review130(6), 3-17. Retrieved Nov. 4, 2010, from Business Source Premier.

Sok, E. (2006). Lower unemployment in 2005. Monthly Labor Review129(3), 3-16. Retrieved Nov. 3, 2010, from Business Source Premier.

Walsh, Kenneth T. (2005) “WAY BACK ON HIS HEELS.” U.S. News & World Report 139.10, 53-54. Retrieved Nov, 4, 2010 from Academic Search Premier.

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