Two Years Later: Katrina's Economic Impact
The nation has recovered, but New Orleans and the region still suffer.
Aug. 28, 2007 -- When the storm made landfall in Louisiana and Mississippi on Aug. 29, 2005, no one knew how vast the devastation would be.
The near total loss of New Orleans and the counties surrounding the grand Creole city was not a regional tragedy, it was a national one, with long-term economic costs to every American.
In the weeks after Hurricane Katrina, oil and gasoline prices spiked, as nearly a third of the nation's refineries and the entire domestic oil production of the Gulf of Mexico were shut down.
Retail gas prices rocketed up 46 cents in a single week to a new nominal record high. Almost immediately, the American consumer started cutting back. Economists say that the storm likely took a full percentage point out of the U.S. gross domestic product in the quarter immediately after the storm.
But nationally, the American economy recovered fairly quickly. The oil infrastructure was back up and running at near pre-Katrina levels in months and retail gas prices dropped to their pre-storm level by the end of October.
"The U.S. economy rebounded from Katrina, although the region hit by the storm has not, demonstrating, once again, how amazingly resilient our economy can be," Dan Laufenberg, chief economist at Ameriprise Financial, told ABC News on the first anniversary of the storm.
In the region directly affected by the storm, thousands lost their jobs and were forced to move to other cities.
Insured losses in Louisiana, Mississippi and Alabama — directly attributable to Katrina — totaled more than $40 billion, according to the Insurance Information Institute. That was nearly double the amount of damage caused by the previous record holder, Hurricane Andrew, in 1992. Andrew left a wake of destruction in south Florida that totaled more than $21 billion in insured losses in today's dollars.
Nearly two years after Katrina, the region is still struggling to regain its pre-storm economic strength, but there are some encouraging signs: Many of the region's economic indicators — sales tax revenue, total employers, jobs and labor force size — have been restored to at least 79 percent of pre-Katrina levels. (Source: Brookings Institution) The U.S. Postal Service says the number of households actively receiving mail in New Orleans as of June is two-thirds of the pre-Katrina number, up from 50 percent one year after the storm. (Source: USPS) After seeing a huge boom in real estate sales immediately after Katrina, sales of single-family homes in the greater New Orleans region have cooled. Single-family home sales averaged more than 1,200 per month across the metro area for the first year after the storm, up from the 1,076 before Katrina. During the second year of recovery, sales dropped back down to 962 per month on average. (Source: New Orleans Association of Realtors) Fair market rents rose an astounding 39 percent from 2005 to 2006, as people scrambled for the sliver of available rental housing in the New Orleans area. By 2007, rents began to stabilize at these higher levels, increasing just 4 percent from 2006 to 2007. A two-bedroom apartment in the region now rents for $978 per month, up from $676 in 2005. (Source: HUD) The portion of the sales tax that comes from hotels and motels, especially for the months between February and May of 2007, representing the major visitor draws of Mardi Gras and Jazz Fest, have also rebounded to near pre-Katrina levels. Specifically, taxes from hotel and motel stays generated a total of $3.4 million in revenue for the city between February and May of 2007, representing 74.2 percent of the total revenues during that period in 2005. (Source: City of New Orleans, Finance Department) According to the most recent estimates, the New Orleans region lost more than 4,000 businesses in the year after the disaster. By the fall of 2006, the city and the metro area region had reached 72 percent and 85 percent of its pre-Katrina employer base. (Source: Louisiana State University) The region's employment base has recovered to approximately 83 percent of its pre-Katrina levels. In the New Orleans metro area today, approximately a half million people are employed. Before the storm blew through the city, more than 600,000 worked there. (Source: BLS) Approximately 3,500 businesses have received grants from the state of Louisiana. The average grant size is $18,100 and given to a firm with fewer than 10 employees. (Source: Louisiana Department of Economic Development)