The Gulf Coast Economy: Ten Years After Hurricanes Katrina and Rita

I vividly remember that moment on August 28, 2005 when it occurred to me that something really bad was getting ready to happen to the Louisiana, Mississippi, and Alabama coast. I was watching the news and I distinctly remember the network, the newscaster, and the hotel lobby that he was reporting from. And I remember thinking that a lot of people there had no idea what the next weeks and months (and years) would be like.

How could they?

Hurricane Katrina’s size, strength, and path combined to make this one of the costliest and deadliest hurricanes in history. Rita followed three weeks later.

I also remember, a few years ago, watching a local business leader in one southern city levitate when I showed him a map of his city with Katrina’s storm surge superimposed over it. My intent was to get the city thinking about resilience. Getting beat up wasn’t part of my plan but my map put me in the path of another dangerous storm. I put the map away.

On the ten-year anniversary of these terrible storms, I thought it might be interesting to see how things have changed. More specifically, I looked at the broad economic trends for coastal watersheds in Louisiana, Mississippi, and Alabama, comparing trends in shore-adjacent counties and parishes (the red lines in the two charts[1]) to those in the rest of the coastal watershed counties and parishes (the blue lines). I didn’t approach this scientifically—I had no real hypothesis to test. I just wanted to parse out the data to see what they look like. I used inflation-adjusted gross domestic product (GDP) as an indicator of overall economic activity.chart 1chart 2

The economy of the region’s coastal watersheds grew at a healthy rate (more than 3 percent annually) from 2000 to 2005. It is interesting that the economic impact of the storms wasn’t visible in the 2005 data. Since the storms occurred more than halfway through the year, annual totals reflect eight months of strong growth and the four months that followed the storms. At this point, the trends diverge.

In shoreline adjacent counties and parishes, the effects of the storm are visible in 2006. However, the real effects of the two hurricanes were far more pronounced that the chart would indicate since a lot of recovery activities were underway, masking a far greater loss of normal economic activity.

GDP in shore-adjacent counties and parishes continued to decline in 2007 and didn’t reach 2005 levels again until 2010—the year the Deepwater Horizon oil spill occurred. Since then, GDP in the region’s shore-adjacent counties and parishes has hovered around 2004 levels. It should be noted that, despite the lack of growth, shore-adjacent areas supported nearly 40 of the state’s jobs and produced nearly 40 percent of the state’s GDP in 2014.

Looking just inland at the next tier of counties and parishes—coastal watershed counties and parishes that are NOT shore-adjacent—we see a starkly different recovery path. Here, the economic effects of Katrina and Rita appear to be minimal. GDP actually increases through 2006.Ambrose1-b

But appearances can be deceiving. These counties and parishes were included in the earliest disaster declarations. Damages were severe, but less severe than in shore-adjacent counties and parishes. For this reason, they probably served as staging areas for recovery activities that brought in workers from around the country. A closer look at these totals (which I haven’t done) is likely to reveal a much greater decline in “normal” economic activity that was offset by recovery activities. This area, too, experienced a decline in GDP after the Deepwater Horizon oil spill. Unlike shore-adjacent counties and parishes, 2014 GDP levels in the inland portions of coastal watersheds are higher than in 2010.

This broad-brush treatment misses a lot. The impact of the storm was far greater in some places, like St. Bernard Parish, Louisiana, than others. The total level of GDP doesn’t reveal changes in the mix of economic activities, where the recovery is likely to have produced winners and losers. It tells us nothing of the demographic changes that occurred, as large number of evacuees never returned, or of the cultural implications of those changes.

More importantly, there is scant evidence of any substantial migration of economic activity to safer areas. Of course, some activity can’t move easily because of the location of costly infrastructure (like oil refineries) or because the nature of the activity requires proximity to the coast (like commercial fishing). The people who work in these facilities shop for groceries and require medical services. Their children go to school. Their families require police protection and fire protection services. Even so, it’s likely that more business activity could have moved inland.

This raises a few questions. Are we providing citizens with the information they need to improve their personal and economic safety? If so, do they have timely access to the resources needed to make the necessary changes? Are people willing to accept the risk of living in a place because of the overriding importance of cultural values and their attachment to that place? What would be lost, culturally and historically, if a substantial migration of people and economic activity did occur? Are there things that could be done to mitigate those cultural and historical losses?

[1] The two charts are identical except for scales.

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