Term Paper on "Economic Impact of Katrina Impact of Hurricane"

Term Paper 20 pages (6883 words) Sources: 20 Style: APA

[EXCERPT] . . . .

Economic Impact of Katrina

Impact of Hurricane Katrina on Job Market and Economy Both Locally and Federally

What is the overall impact of Hurricane Katrina on labor markets in affected areas and how that affected both local and the national economy?

When Hurricane Katrina slammed into the Gulf coast, it left behind many lasting affects. Aside from the horrendous loss of life, the Hurricane left behind devastation and destruction of unprecedented amounts. There are two primary arguments concerning the impact of Katrina on employment and the Labor Market in the south and in the nation. The first scenario only considers the loss of business in the area. The other considers the need to rebuild, creating a surge in the construction industry. This research will explore both sides of the labor market issue in the wake of Katrina.

The Bureau of Labor Statistics has attempted to measure the affects on local labor markets in the aftermath of Katrina (Clayton & Spletzer, 2006). Wage records from Louisiana and Texas, as well as data from the Quarterly Census of Employment and Wages (QCEW) were used as primary sources of measurement. Documents from the U.S. Department of Labor are considered to be primary sources in this research study. They contain information that the civilian researcher does not have access to and are considered the most credible sources available. Therefore, resources from sources such as these will be the primary data source for this study.

Business is a dynamic force, with layers of relationships that take many years to establish (Clayton & Spletzer, 2006). Katrina represents a force of rapid change in New Orleans and in the surrounding area. Katrina wiped businesses out in an instant, yet at the same time opened the door for new ones to take their place. The socio-economic status of the New Orleans area made it unique. The people of the area are close knit and their business relationships often extend into other areas of their life. After Katrina, the fabric has changed. New Orleans will rebuild and recover from the disaster, but the fabric has changed and the new economy will be built on a new set of relationships. The old fabric of the city has been changed forever.

The first major change in the labor market and business landscape of New Orleans was a drastic population drop. The population of Orleans Parish dropped from 437,186 in July of 2005 to 158,305 as of January 1, 2006 (U.S. Census Bureau, 2006). These population drops were the result of several forces. First, there were those that were killed or severely injured by the Hurricane. The evacuation took many rapidly from the area. However, the evacuation was temporary. Many returned to the areas to rebuild, but many did not and remained in other areas of the country. As old jobs were wiped from the face of the earth, people continued to leave the New Orleans area for more hospitable conditions. With 7,361 persons still living in FEMA trailers as of April 2008, the living conditions and opportunities in the New Orleans area do not look appealing to many (FEMA, 2008).

The affects of natural disaster are typically short-lived events. Buildings are destroyed and the floodwaters quickly rise and recede. Business and life returns to normal in most cases. However, this was not true with Katrina. The damage was so widespread and the floodwaters remained high for quite some time after the storm was over. Recovery from Katrina was slower than from many similar natural disasters. Katrina was set apart from other similar disasters were the scope of the destruction and the slowness of the recovery. This was the key overall factor that resulted in the greatest amount to long-term impact on the economy and labor force.

Labor Force in Transition

According to required federal labor wage records, the number of jobs in Louisiana and Texas were on the rise for the first three quarters of 2005 (Clayton & Spletzer, 2006). However, the number of jobs dropped in the fourth quarter of 2005 (Clayton & Spletzer, 2006). The greatest impact was seen in New Orleans. As of the third quarter, 2005, New Orleans reported 425,474 persons employed in the area. In the fourth quarter, this number was reduced to 351,212 (Clayton & Spletzer, 2006). However, remarkably the number of unemployment claims dropped by almost 500 new claims in the same period (Clayton & Spletzer, 2006). Typically, when one sees a localized drastic reduction in the workforce, they will also see an increase in unemployment claims. This was not the case in New Orleans.

Statistics in Louisiana and Texas followed a similar pattern. In Louisiana, there were 1,965,717 wage earners in the state. In the fourth quarter of 2005, this number dropped to 1,936,403 (Clayton & Spletzer, 2006). This is only a reduction of approximately 1%. New unemployment claims dropped from 82,441 to 79,774, still not a significant drop, but it still raises an important question, where did those workers go?

Only Texas did not follow the pattern demonstrated in New Orleans and in Louisiana. In the third quarter of 2005, Texas had 11,133,717 wage earners. In the fourth quarter, this number dropped to 10,948,552. This is not a significant loss in jobs, but it still demonstrates that Katrina had an impact on the entire region, even if the affect was small. Only in Texas did unemployment claims jump in the fourth quarter. Unemployment claims rose statewide from 382,819 to 388,519 (Clayton & Spletzer, 2006). Only 185,165 jobs were lost, with only 5,700 new claims filed for unemployment.

The impact of Katrina on the labor force was felt the greatest in New Orleans and the area immediately surrounding the flooded city. This impact is reduced when one spreads the effect out over the entire state of Louisiana. It still had a traumatic impact on the state of Louisiana, which may be because New Orleans was a major economic center and business district for the state of Louisiana. When one spreads the effect out over the region, the impact is even less. On a national level, the labor impact of Katrina is barely noticeable.

Although the numbers of workers displaced sounds significant, particularly when one considers the area directly surrounding New Orleans. However, the impact of Katrina on the labor force is diluted as one considered larger and larger geographic areas. The pattern discovered in the labor force looks much like the destruction of the hurricane itself. In the area that was in the direct path of Katrina, the hurricane had the greatest impact on the labor force. However, as one moved farther from the site of landfall, the impact of the destruction becomes less noticeable, until is it hardly noticed at all on a national level.

This still leaves the question of what happened to the workers that lost their jobs in the wake of Katrina. They do not appear to have filed unemployment in the local area. There are several explanations that may help to answer this question. The first explanation is that the workers simply left to seek employment in other parts of the country. They were absorbed into the economies. Once again, there would be some type of dilution effect as one worker went here and one worker went there. The effect on the local economies would not be that significant and would be difficult to reliably track, if that were the case.

However, another explanation can be found by comparing labor records from 2005 with those of previous years. When one compares the records of Texas, a similar pattern can be found, with a rising labor force for the first three quarters and then a dramatic drop in the fourth quarter. The explanation for this is seasonal worker (Clayton & Spletzer, 2006). Texas has many people that come into the area to work the fields and leave after the harvest is in. The labor pattern seen in Texas is no different from in any other year. This is a regional factor that is unique to the region and that many analysts tend to forget.

Now one must ask how this same trend translates into Louisiana and New Orleans. Another interesting pattern can be seen in the historical labor results of Louisiana and New Orleans. New Orleans typically has a higher labor force in the first, second, and third quarters with a drop in the fourth quarter. Seasonal farm labor could play a factor in this yearly decrease in labor as well. However, in New Orleans, the highest employment occurs in the first quarter. Mardi Gras is a regular first quarter boost to the economy of New Orleans.

Many seasonal employees come to the area at this time of year. Mardi Gras kicks off a tourist season that continues through summer. Further support for this supposition is that historically, unemployment figures have tracked along with labor data. As labor and wages increase during the first quarter, unemployment is at its lowest. However, as the number of workers drops in the… READ MORE

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