Katrina Anniversary: Where Things Stand on New Orleans' Economy

Five years after Hurricane Katrina hit the Gulf region, New Orleans is still recovering from the disaster -- a recovery now compounded by the worldwide recession and the effects of the BP oil spill.

On this day five years ago, the storm that would become Hurricane Katrina was still called Tropical Depression 12, moving slowly north and west over the Bahamas. No one knew whether this tropical system would become the the long-feared, cataclysmic storm that could overpower New Orleans' complex levee system and fill the bowl-shaped city with water.

Visit ABCNews.com this week for our series 'Katrina: Where Things Stand'

Katrina was that storm, so big that its probability of occurring was once every 400 years. When the rising waters overpowered the levees, roughly 80 percent of the city flooded, causing the deaths of at least 1,464 Louisiana residents, even if the city did not take a direct hit. The Gulf Coast sustained some $135 billion in property damage.

Hundreds of thousands of people were forced to flee their homes, and a portion of the city simply never returned. The population of New Orleans plummeted almost 54 percent, from 455,188 in July 2005 to 208,548 a year later, according to the Greater New Orleans Community Data Center.

Katrina's flooding struck hardest in such residential areas as Gentilly and the Lower Ninth Wardre. While the waters largely spared the Central Business District and the French Quarter, more then 130,000 homes were damaged in the storm, some 70 percent of occupied units.

City Recovers From Storm, Struggles With National Recession

Five years later, the city has made great strides. But while rebuilding fueled the economy in the initial years following the storm, the recovery has slowed as the nation struggles against a long recession.

Now there's new fears about the long-term effects of BP's oil spill on the economic health of the region.

"We are five years into a 10- to 20-year recovery," said Allison Plyer, the chief demographer at the Greater New Orleans Community Data Center.

For Plyer, who's tracked every facet of the recovery by the numbers, New Orleans' progress can be summed up this way: "The glass is half [full]."

The gross domestic product of the New Orleans metropolitan area has continued to grow in the years following Katrina, fueled in part by reconstruction spending. According to the most recent numbers from the Department of Commerce, the city's GDP is almost $9 billion higher than it was in 2005, unadjusted for inflation.

Population Recovers to 80 Percent of Pre-Katrina Levels

The city has sought to restore its pre-Katrina businesses while aggressively courting new industries, including the film industry, IT and the biosciences.

"My take on this is that the people that are here want to be here," said Ben Johnson, the managing director of the New Orleans Chamber of Commerce as he described the high levels of civic engagement.

According to the most recent data from July 2009, the city's population stands at 354,850, nearly 80 percent of its pre-Katrina levels.

"Folks need jobs to come back, and we are not regaining jobs at the pace we were in 2007 and 2008," said Plyer. "We've lost 1 percent of all jobs since the recession started."

New Orleans Tourism Makes a Comeback

Just as before Katrina, New Orleans' biggest employer and biggest source of tax revenue is tourism. The industry employs some 70,000 people in the city, including chefs, street jugglers, blackjack dealers in its casino.

Before the storm, in 2004, New Orleans welcomed 10.1 million visitors to the city, who came for business and tourism. Post-Katrina, that number plummeted to 3.7 million visitors in 2006, according to the city's visitor's bureau.

"We had an enormous damage to our brand and to the reputation of the city," said Kelly Schulz, vice president of communications for the New Orleans Convention and Visitors Bureau. "People were not sure if they'd ever be able to visit New Orleans again."

Over the past five years, tourism has made a comeback. Visits jumped to 7.1 million in 2007, but since then progress has been more measured, hampered by the nation's economic downturn and a cut in corporate travel spending. In 2008, 7.6 million people visited New Orleans, while in 2009, the visitor's bureau counted 7.5 million visitors, who spent $4.2 billion during their travels.

'Voluntourism' Brings New Visitors to the City

By some benchmarks, the New Orleans fares even better as a destination before the storm. Millions have been spent expanding tourist sites, including the Audubon Zoo and the National World War II Museum. This year, the city had its largest Mardi Gras celebration in 25 years.

The city's tourism industry has even found ways to capitalize on the Katrina disaster. Some of the recovery has been driven by "voluntourism" -- visitors who come to the city to help rebuild -- while also fitting in some sightseeing. There are also Katrina tours that take visitors on buses or vans through such neighborhoods as the Lower Ninth Ward and near the levee breaches so that they can see firsthand what happened.

Still, the number of meetings and conventions in the city is still down when compared with pre-Katrina levels, and the city's 70,000 tourism jobs are still below the 85,000 jobs that existed previously. The is served by fewer daily flights than before the storm, and it has lost close to 1,500 fewer hotel rooms.

"We've had to work really hard to educate people," Schulz said. "In the tourism business, everything is based on image and perception. We've really focused on marketing and dispelling myths that exist."

Oil Spill Fears Hit Restaurant Industry

Now there's new fears that the BP oil spill has fed new myths that could keep visitors away, and the visitors bureau is working to get the word out that the city's most famous product -- fresh seafood -- is still plentiful and safe.

"The first six months of this year, we were back to operating as usual," said Wendy Waren, vice president of communications for the Louisiana Restaurant Association."Now, we have an oil spill."

The restaurant business recovered with the return of the population. Before Katrina, Orleans Parish had more than 1,800 food service establishments, while today they number about 1,500, according to the Louisiana Restaurant Association.

"The last five years, we've seen a lot of new restaurants open, and a lot more diversity in the offerings," said Waren. "Our people kind of don't wait around. They reopen based on the need in their neighborhood."

Storm Stirs Melting Pot of Culture

If anecdotal evidence from the city's restaurant tables suggests a change in culture, the hard data backs it up. Just as Katrina reshaped the Louisiana coastline, the power of the storm changed the racial and socioeconomic makeup of the city.

According to a report from the Kaiser Family Foundation, nine out of 10 people now living in New Orleans lived there during the time of Katrina. But the 10 percent who moved in after the storm are "substantially younger, more educated, more likely to be white and more likely to be renting."

Of the hundreds of thousands who fled in 2005, many of those who never came back were the urban, largely African-American poor.

"It can be a very difficult place for a lot of people," said Plyer, pointing out that median rental prices in the city are now an average $900 per month. "Many of the poorest individuals were not able to come back."

Today, Orleans Parish is still mainly African-American, and the New Orleans population is on the whole more middle-class.

Racial Divisions Change in Post-Katrina Years

In a city that struggled with racial polarization for decades, a surprising effect of the storm has been a softening of racial divisions. For the first time in decades, the city has a white mayor, Mitch Landrieu.

"Relationships between black and white, which were unique to begin with in the city, have also begun to change," said Arnold Hirsch, a professor of New Orleans studies at the University of New Orleans, who first moved to the city in 1979. "The Landrieu administration represents not a retrogression. I think it represents a good hope for the city."

That could be in part because New Orleans' population, long a melting pot culture, has diversified and shifted in other noticeable ways as well.

"It's a different mix," said Hirsch. "As part of the rebuilding process, there's been a huge influx of immigrants coming in from Mexico and elsewhere to help work on the city."

Sense of Hopefullness Returns to New Orleans

Five years after Katrina, New Orleans still has much to overcome, from a rising crime rate to the 50,000 homes that remain blighted or abandoned.

But there's also an undeniable sense of optimism.

"We've seen that we can take the future of our city in our hands," said Plyer, expressing the wish of many that New Orleans can continue to seize an opportunity to become even better than before Katrina struck the Gulf coast.

"There's a delicate sense of hopefulness here," said Hirsch. "It's still a little soon to tell where we're going to wind up."

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