After the Storm: Economic Recovery after Katrina and Sandy

Last year there were 15 named storms, 10 hurricanes, 6 category 3+ hurricanes during the Atlantic hurricane season, making it the 7th most active in history. Hurricane Harvey had a total cost of $125 billion, second only to Katrina, which had an approximate cost of $161 billion (according to the National Oceanic and Atmospheric Administration’s Office for Coastal Management).

In the immediate aftermath, devastating hurricanes and other natural disasters get a lot of coverage and then quickly disappear from the national discussion. However, we wanted to see the longer term economic implications of these major weather events—by revisiting our Top 20 Industries Most Affected by Hurricane Katrina article on Hurricane Katrina and by investigating impacts to New York City by Superstorm Sandy from 2012. For each event we looked at the economic impacts five years from when it first occurred. Additionally, we explored economic development funding used to stimulate recovery and provide guidance on how to prepare communities for future events.

Hurricane Katrina

Katrina struck the Gulf coast in August 2005, hitting Orleans Parish, LA devastating its population, workforce, and business community.

Our previous article examined workforce at the 6-digit NAICS level to determine which industries in Orleans Parish suffered the most job loss after Hurricane Katrina by comparing data from the year prior and year after Katrina. To assess how the area responded to the recovery period, we examined population, job, and industry growth from post Katrina to five years after the event (2004 to 2010).

Prior to Hurricane Katrina, Orleans Parish had a population of approximately 494,000 people. Population levels declined by more than half to 230,000 people by 2006. Since 2006, the population steadily increased to nearly 344,000 in 2010.

The workforce of Orleans Parish plummeted from 280,000 workers in 2004 to 174,000 post-Katrina in 2006--a 38% drop. Since 2006, the workforce steadily increased to reach approximately 195,000 workers in 2010. 

We examined five 2-digit industries to gain an understanding of industry growth following Hurricane Katrina. Although minimal, most of the five industries experienced growth since post-hurricane job levels in 2006. However, the Finance and Insurance industry has struggled to regrow, declining from 10,000 jobs in 2004 to 6,300 post-Katrina, followed by minimal growth and ultimately decline to 5,800 jobs in 2010 (this may have more to do with the financial crisis the country was headed into at that time). Conversely, the Professional, Scientific, and Technical Services industry was nearly back to pre-hurricane level of approximately 16,000 jobs in 2004 to just below 15,000 in 2010.

Superstorm Sandy

In October 2012, Superstorm Sandy stuck the Northeastern coast of the United States, severely affecting New York City, its suburbs, and New Jersey. In total, the hurricane caused approximately $65 billion worth of damage, only second to Hurricane Katrina (National Oceanic and Atmospheric Administration). Over 650,000 homes and 250,000 vehicles were destroyed (Aon Benfield). Sandy left 8.5 million customers without power across 15 states and the District of Colombia (FEMA). New York City and New Jersey were the most impacted by the hurricane; across the region, airport services were limited, schools were closed, and many tourist activities were shut down.

Due to the high prevalence of damage around New York City, New Jersey, and its surrounding areas, the New York City metropolitan statistical area (NYC MSA) was used to analyze the impact of Superstorm Sandy on its population, jobs, and industries. Again, data for the area was collected for the year prior to the natural disaster and for the five years following the incident to examine regrowth trends. As shown in the following chart, population growth within the NYC MSA continued to increase despite disruptions due to Superstorm Sandy.

Similar to population trends, job growth has also remained relatively unaffected by Superstorm Sandy. In fact, the number of jobs within the NYC MSA has increased from 9.2 million in 2011 to over 10.1 million in 2017, a 10% growth. 

We examined the same five industries at the 2-digit NAICS level as we did for the Katrina analysis to help illustrate how the different economies responded to natural disasters. The industries within the NYC MSA appear significantly less affected compared to Orleans Parish. Within the NYC MSA, Professional, Scientific, and Technical Services and the Construction industries continued to grow following the event. Of the three industries that declined after the 2012 event, Manufacturing was the only one that did not regrow to its pre-Sandy levels by 2010. Manufacturing declined from 388,000 jobs in 2011 to 381,000 in 2013 and continued declining to 371,000 by 2017. Finance and Insurance and the Information industries suffered minimal declines following Superstorm Sandy, but are showing growth again.

Why was the Orleans Parish’s economy so dramatically impacted by Katrina when Sandy is barely a blip in the data? There isn’t a single easy answer, but some of the major contributing factors include:

  • Mother Nature: These were two completely different climatic events that made landfall in two very different environments. Katrina hit Louisiana as a Category 3 storm with 120 mph winds and Sandy hit New Jersey as a Category 1 storm with 80 mph winds.
  • Government Response: Pre-storm warnings and immediate response from the federal government was dramatically different. Sandy benefited from the hard lessons learned during Katrina.
  • Displacement: Over 1 million people were displaced because of Katrina, and one-tenth of that (about 100,000) from Sandy.
  • National Economic Health: The national economy was headed into a recession post-Katrina, and had just climbed out of it when Sandy hit.
  • Local Economic Differences: Relative size of the two economies are vastly different. Katrina caused $161 billion in property damage in a $23.5 billion economy (2016 GRP) and Sandy caused $65 billion in a $1.6 trillion economy (2016 GRP).

So, what does this exercise tell us? It tells us that the path to economic resiliency from natural and man-made disasters can’t be a one-size-fits-all approach. Each community will be affected differently when natural disasters occur; the pre-planning and recovery-response must reflect individual community’s needs.

Economic Development Funding for Disaster Recovery

Economic development strategic funding plays a vital role in helping communities remain resilient and recover from natural disasters. Both New Orleans and the New York City MSA were able to rebuild and rebound from the natural disasters due in part to economic development funding.

New Orleans and Hurricane Katrina

New Orleans continues to rebuild after Hurricane Katrina. The region has grown to nearly 195,000 jobs in 2008 and nearly 224,000 in 2017. Federal funding from FEMA (the Federal Emergency Management Agency) and federal block grants contributed to $120.5 billion and $247.5 million respectively to rebuild the Gulf Region and its schools. Small business loans, Department of Commerce investment, and Housing and Urban Development (HUD) and Internal Revenue Service’s (IRS) community renewal effort aided in stimulating businesses and development of investments in the Gulf region. The Department of Labor (DOL) contributed over $350 million in grants to develop the regional workforce. The Army Corps of Engineers, NOAA, FEMA, the Coast Guard, and the Environmental Protection Agency (EPA) contributed resources and funding for environmental cleanup and restoration. Through the assistance of economic development funding and resources New Orleans has brought $7 billion in capital investment in the last five years alone, making New Orleans a great location for startups and young professionals.

New York City MSA and Superstorm Sandy

New York City is the largest urban economy and leading hub for banking, finance, and communication in the United States. Thus, any impact a natural disaster may have on its economy effects not only New York State but the entire nation. The Community Development Block Grant program was vital for individuals affected by Superstorm Sandy, allocating $4.2 billion to help rebuild businesses, homes, and communities through infrastructure and resiliency programs. New York State Empire State Development offered businesses impacted by Superstorm Sandy loans of $50,000 and greater to rebuild and replace capital. US Small Business Administration offered Business Physical Disaster loans to help businesses and not-for-profits rebuild and restore damaged property following disaster. Through funding and restoration efforts, Superstorm Sandy only temporary disrupted businesses in the affected areas. In fact, New York City MSA job growth accelerated from 1% in the two years prior to Superstorm Sandy to around 4% in the years following. Superstorm Sandy appeared to only disrupt businesses in the short term.

Planning for Economic Resiliency from Natural and Manmade Disasters

“It is becoming increasingly apparent that regional economic prosperity is linked to an area’s ability to prevent, withstand, and quickly recover from major disruptions to its economic base.”

- US Economic Development Administration, CEDS Guidelines

While some areas are more at-risk than others, no community is immune from natural and manmade disasters. Therefore, it is crucial that communities and business are prepared for major disaster events. To do so, communities are preparing strategic plans that are adaptable and able to help impacted sectors rebound following natural disasters. The Comprehensive Economic Development Strategy (CEDS) process incorporates resiliency in order to anticipate risks, evaluate impact on the economy, and build equitable response measures to avoid the disruption or to mitigate effect. The Economic Resilience section of the CEDS requests that goals, strategies, and actions aim to mitigate the effect of an economic incident and support long-term recovery efforts. Specifically, the CEDS provides a general framework to identify strategies to build economic resilience, including:

  • Identifying persistent economic challenges or deficiencies
  • Preparing for disruption by identifying “early-warning” tools
  • Building mechanisms that create flexibility
  • Promoting a positive vision for the region

Through this process, a region can allocate resources into established information networks and pre-disaster recovery planning efforts. Economic resiliency strategies that result from the CEDS process encourage increased coordination between agencies to reduce time delays and increase efficiencies, establish emergency contracts, identify resources to assist during an environmental event or disaster, and provide school based learning on environmental risks and how they impact the economy.

Click this link to learn more about Comprehensive Economic Development Strategies.

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