The Backyard Economy: Louisiana

— -- Life in the "Big Easy" and Louisiana was anything but after Hurricanes Katrina and Rita, which decimated this Gulf Coast state three years ago.

"After Katrina, it was like living on Mars," said Peter Ricchuiti, a finance professor at Tulane University in New Orleans. "It had nothing to do with the rest of the country."

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More than 200,000 homes were destroyed, forcing thousands of people to flee the state to find shelter and work. Oil and gasoline prices soared throughout the country as the region's crucial oil wells and refineries were shut down. Insured losses totaled more than $40 billion.

But the economy has improved and the outlook for the Crescent City and the state looks better than it has in previous years. Even as the national economy has weathered its own storm, Louisiana has prospered, thanks to the state's dependence on industries that benefit from the high prices that hurt consumers in other parts of the country.

"Things that show up as bad headline news have a bit of a silver lining here in Louisiana," Ricchuiti said.

The state has profited from the rise in energy prices as it is the nation's second largest producer of oil and the largest producer of natural gas. In addition, higher food prices have also helped the bottom line for the state's farmers. Shipping through the Port of New Orleans has recovered to pre-hurricane levels, aided in large part by a weak dollar that has increased overseas demand for U.S.-made goods.

Even tourists and conventioneers have returned to New Orleans, many participating in what Ricchuiti refers to as "voluntourism": Companies host a conference in the city and then extend the trip by an extra day so employees can volunteer to gut or rebuild damaged homes or clean up neighborhoods.

Add to all of this the billions of dollars in aid that have poured into the state to rebuild. That money has, according to Ricchuiti, "really created a lot of incentives to companies to open" in New Orleans.

But it's not all sugary sweet beignets for the state's economy. The mass exodus from New Orleans after the storms reduced the population of the city and the surrounding communities by nearly one-quarter. Two years later, the metro area has only regained a small portion of that lost population.

With fewer residents living in the state, Louisiana actually faces a worker shortage, especially in the state's booming oil sector.

"One of the only things slowing us down is the shortage of labor," Ricchuiti said referring to the state's oil patch. "We need to get more labor to work in these jobs, but we need more housing to get people to work in the jobs."

The lack of housing and skilled workers has limited the ability of the businesses to expand. Moody's Economy.com concluded that "a slower-than-anticipated return of residents is a serious downside risk" and added that "despite the massive rebuilding efforts, it will take until the end of this decade for [Louisiana] employment to make a complete recovery."