A Tale Of Two Cities: New Orleans After Katrina

From November 2005 to June 2006, payrolls grew an average of 7,400 a month. That slowed to 2,000 a month in the second half of 2006. For the first five months of this year, it was down to 1,000 a month. As of July, there were 503,600 non-farm payroll jobs, a decline from the peak in June.

GDP data is also not very encouraging. The economy grew a robust 5.1% in 2004, was almost flat in 2005, and managed a 1.7% gain in 2006, well below the national growth rate.

Even before Katrina, New Orleans job base had been changing and shrinking. Between 1960 and 2000, the city’s population declined more than 20% which had a dramatic effect on the labor-housing market dynamic. Simply put, housing became unusually cheap.

Vigdor of Duke University says many of the people who remained were relatively low-skilled workers, with poor-paying jobs and little chance of advancement. They remained because of a low cost of living, thanks largely to a glut of housing, which depressed prices.

Shortly after the disaster, FEMA estimated close to 140,000 homes and rental properties in the New Orleans metropolitan area were destroyed or left uninhabitable by the storm. Some $13.5 billion was paid out to Louisiana homeowners under the National Flood Insurance Program.

"The housing market was turned upside down, or is it right side up?" says Vigdor. So was the workforce.

The population of the metropolitan is now 1.2 million versus its pre-Katrina level of 1.4 million. Orleans Parish, which includes the City of New Orleans and some adjacent areas, was recently estimated to have a population of 273,000 -- 60% of its 2004 level.

"The hospitality industry thrived because there was a supply of workers," explains Vigdor.

His analysis of evacuee data indicates that those who have returned are doing pretty well in finding jobs with decent pay. People in the lower wage, service category are not moving back. That supply has been reduced and business has had to adjust.

"We are using a great deal of contract labor," says Gray of Holiday Inn.

Sawyers at the Hilton is also using more contract labor than before. He says there’s also a shortage of more high-skilled culinary workers and guesses that wages for such jobs have risen 20%-30% as a result.

Even Shulz of the convention center says labor "is a big question we get" from prospective clients. "They want to know are there going to be people to staff the hotels and restaurants," she adds,

The labor shortage is a widespread problem, says Scott, the economist. "Employers tell me they are in desperate need of people. Some are recruiting overseas."

Scott adds that the bigger employers, such as the shipyards and refiners, had the financial wherewithal to weather the work stoppage resulting from the storms, come up creative ways to deal with housing and to keep their payrolls stable. Smaller and local employers have struggled.

Long Road Home

The construction sector is also in need of workers. A shortage of general contractors along with sharply higher home insurance and utility bills is hurting homeowners struggling to recover.

The bulk of that task falls on "The Road Home" program, which administers relief efforts for the state. It was formed to provide up to $150,000 to cover uninsured losses resulting from major and severe damage.

CONTINUED: Helping Homeowners

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