Economic Impact of Katrina Impact Term Paper

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This is a pattern that is relatively consistent over a long time period (Clayton & Spletzer, 2006). The only difference in 2005 was that unemployment claims did not rise in the fourth quarter with the drop in jobs, as they had done in the past.

It is difficult to draw definitive conclusions as to where these employees went in the fourth quarter of 2005. To do so would be filled with generalizations that do not account for all of the factors involved. However, it can be surmised that in the fourth quarter of 2005, workers in New Orleans went elsewhere and were dispersed into other economies. Statewide numbers do not support a change that is significantly different from other years. Therefore, it does nor= appear that this diaspora had an impact on a state or national level. The only reasonable explanation is that unlike other years, where workers filed unemployment and stuck around the are waiting for first quarter employment to pick up the pace, after Katrina these workers left for higher ground.

On a local level, Hurricane Katrina has a measurable impact on New Orleans and the area surrounding New Orleans. The state of Louisiana had to absorb some of the impact of displaced workers, but the affect becomes diluted in the larger economy of the state. The impact is even more diluted on a regional level. It is hardly noticeable on a national level. There are unique yearly cycles in the local economy that account for some of the changes. However, unemployment figures indicate that Katrina did have the effect of dispersing the New Orleans workforce to other areas of the country.

This analysis takes into account several factors that are ignored by other researchers. Before jumping to conclusions about the impact of an event on the economy, one must examine the normal cycles that exist within the area. These must be ruled out as an explanation for the events under investigation before the affects of an unusual event can be blamed for the pattern. One anomaly appears in the labor records of New Orleans that indicates that Katrina had a significant impact on the local economy of New Orleans. No one will ever know where all of the workers went in the fourth quarter of 2005, but it is highly suggested that they followed a different pattern than in years past. Katrina appears to have a connection to the disappearing labor force of New Orleans in 2005.

Chapter 4:

The second sub-question is what has been the economies (local/national) overall ability to bounce back after Hurricane Katrina?

In the previous chapter, the impact of Katrina on the labor force was examined on three different levels. The greatest impact was felt on a local level in the area surrounding New Orleans. As we moved farther from the path of destruction, the affect was diluted and absorbed on each successively higher level. On a national level, Katrina itself has little direct economic impact. However, the affects of Katrina are unique in the fact that although the direct impact was relatively small, when one considers the indirect affects of Katrina, the nation felt the destruction in a very real manner.

The aftermath of Katrina had economists running algorithms to predict the national and regional impact as fast as their fingers could press the buttons. Predictions ranged from barely noticeable to disastrous (Englund, 2005). Analyst opinions varied widely, based on the factors that they chose to use for their algorithms and their knowledge of the region and its unique economic cycles.

Aside from the economic impact that is a direct loss related to the storm damage, Katrina's destruction had an impact on a wider area due to three important factors. First, Katrina disrupted oil production in the Gulf of Mexico (Englund, 2005). As oil rigs were battened down and abandoned for land, millions of gallons were not being pumped. Some rigs were destroyed or significantly damaged by the storm. Some will never be recovered, others will need costly repairs and much more downtime in order to be returned to pre-Katrina productivity.

The second major impact is that Katrina destroyed a major urban center, New Orleans (Englund, 2005). Businesses could not immediately begin clean up and go on with business as usual after Katrina. They had to wait until the flood waters receded and then some had to rebuild their businesses literally from the ground up. They took a major financial loss as their customer base had been evacuated elsewhere and tourists were reluctant to come to the area.

The third major impact that Katrina has was to disrupt transportation on the Mississippi River (Englund, 2005). The Mississippi is a major artery to the Midwest and to other parts of the country. Disruptions on the Mississippi River have an impact nationwide on transportation, the items had to be moved using more expensive land and air routes, affecting prices across the nation.

Katrina was unlike other disasters, not only by the magnitude, but also in the area that it struck. New Orleans is a major transportation artery, coupled with losses in oil production and other commodities, losses that affect New Orleans have a dramatic impact on the rest of the country. Katrina struck a critical region. It was like cutting off a major artery to the heart. This artery has a dramatic effect on the local area, but the impact spreads to other regions, in more indirect ways. This was the affect that Katrina had on the rest of the country.

How big is the economic Impact?

The affects of Katrina are directly related to the contribution of New Orleans to the national economy. In order fully to assess the impact of Katrina on a national and international level, one must examine the commodities that New Orleans supplies. Approximately 7% of U.S. exports are produced in the Gulf region (Nutting, 2005). Exports from the region include grain, poultry, paper, rice, and chemicals (Nutting, 2005). Major imports come in through the Mississippi ports including petroleum, steel, rubber, plywood and coffee (Nutting, 2005). Only until these vital imports were interrupted did the real impact of Katrina hit the nation.

Katrina disrupted approximately 22% of the Gulf oil supply and nearly 55% of Gulf natural gas production (Nutting, 2005). The length of the disruption was relatively short, only from 10-30 days, but the amount of production lost during that time was estimated to be nearly billions of dollars in lost crude. This short disruption in supply had a trickle down effect on the rest of the economy.

As oil and gas companies struggled to get production up to speed, gas prices rose. As Americans struggled to make up for higher fuel costs, they cut expenditures in other places. Is estimated that high energy prices would drive consumption lower. It was estimated that if gas prices hit $3.00 per gallon, it would result in an estimated 0.3-0.5% point drop in U.S. gross domestic production (Nutting, 2005).

The affects of high gas prices as a result of Katrina were expected to be short-lived. It was expected that gas prices would go down. However, yesterday's gas prices were approximately $4.00 at the pump and they are not expected to go down any time soon. The question that this raises is whether Katrina was really to blame for the long-term spike in gas prices, or whether the Hurricane made an easy scapegoat.

The effects of Hurricane Katrina were in the news for approximately a year, touted as the cause of U.S. economic woes. However, as we discussed in the previous chapter, even though the Gulf region is an important economic center and accounts for approximately 7% of the national economy, there is still another 93% to absorb the shock. Katrina's affect was greater on a local level. On a national level, it had an impact that was felt at the gas tank, and it had a trickle down affect on other commodities, but it was not enough to bring the U.S. To a standstill. It only caused a few minor inconveniences on a national level. The nation has recovered from the impact of Hurricane Katrina.

In 2005, one could find numerous reports of the lasting effects of Katrina (Plummer, 2005; Geller, 2005; Trumbull, 2005). Reports provided bleak reports and created widespread spread in anticipation of the storm. These same articles were still around in 2006, with their gloomy outlook on the economy, as a result of Katrina (Herman, 2006). These articles focused on the local affects on the economy. The news was not longer presenting it as a national crisis. One year after Katrina, the most noticeable affects on the economy were in oil and gas prices (Herman, 2006). However, when one tries to find these same types of articles in 2008, they are virtually nonexistent. The focus has now moved on to other more pressing issues affecting the economy.

One of the key areas affected by Katrina was in the area of professional sports. Both…[continue]

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