Worker Mobility before and after Hurricane Katrina: A Substantial Number of Workers Were Displaced from the New Orleans Metropolitan Statistical Area after Hurricane Katrina; Those Who Quickly Found Jobs in Texas Experienced a Substantial Decline in Their Short-Term Earnings

By Clayton, Richard L.; Spletzer, James R. | Monthly Labor Review, August 2006 | Go to article overview
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Worker Mobility before and after Hurricane Katrina: A Substantial Number of Workers Were Displaced from the New Orleans Metropolitan Statistical Area after Hurricane Katrina; Those Who Quickly Found Jobs in Texas Experienced a Substantial Decline in Their Short-Term Earnings


Clayton, Richard L., Spletzer, James R., Monthly Labor Review


Hurricane Katrina formed over the Bahamas on August 23, 2005, and crossed southern Florida on August 25th as a moderate category 1 hurricane. During the next several days, Hurricane Katrina strengthened rapidly in the Gulf of Mexico, attaining the status of a category 5 storm. On August 29, 2005, Hurricane Katrina recorded its second landfall as a category 3 storm in southeast Louisiana. Hurricane Katrina was the costliest and one of the deadliest hurricanes in the history of the United States. The storm caused devastation along the Gulf coasts of Alabama, Mississippi, and Louisiana, with catastrophic effects on the city of New Orleans. Levees separating Lake Pontchartrain from New Orleans were breached by the storm surge, ultimately flooding roughly 80 percent of the city and many areas of neighboring parishes. (1)

The States and the Bureau of Labor Statistics have done much to measure the labor market effects resulting from Hurricane Katrina. Many of these efforts are described in the other articles in this issue of Monthly Labor Review. This article studies the labor market effects of Hurricane Katrina using wage records from Louisiana and Texas, enhanced with data from the Quarterly Census of Employment and Wages (QCEW). Wage records are administrative data collected as part of the Federal and State Unemployment Insurance programs (UI), and are increasingly used by economists for research purposes. The analysis presented in this article shows that QCEW-enhanced wage records are a useful tool for studying the employment and earnings impact from a large displacement event such as Hurricane Katrina.

A dynamic economy depends on a range of existing relationships, such as those between employers and employees (and their families), customers and suppliers, private and public institutions, and other community infrastructure. These relationships can take decades to establish and perhaps only days to destroy. In any economy, there is a constant level of change to these relationships; firms are born and some firms die, employees are hired and some are separated--some employees move to other jobs and some move to other locations. This creative-destruction process, along with a normal level of worker mobility, is healthy and positive.

However, New Orleans after Katrina is a changed economy. The tightly knit socio-economic fabric of relationships in the New Orleans area was severely damaged by the physical devastation to the New Orleans area and the resulting evacuation of large numbers of people. Statistics from the Census Bureau show that the population in Orleans Parish dropped from 437,186 on July 1, 2005 to 158,305 on January 1, 2006, and the population of the seven parishes that make up the New Orleans metropolitan statistical area (MSA) dropped by 29 percent, from 1,292,774 to 914,745, over the same timeframe. (2)

Natural disasters such as hurricanes, tornadoes, and floods usually involve rather temporary disruptions to the local economy. Typically, hurricanes affect immediate coastal areas and lose their force within a short time over land. Winds die down, flood waters recede, and evacuees return within days of the event to examine their households and businesses and begin the process of rebuilding. Many economic relationships are bent, and a few are broken.

Hurricane Katrina, however, was a truly unusual and abnormal event. New Orleans is a bowl-shaped flood area that is very densely populated. The New Orleans flooding from Hurricane Katrina and the re-flooding from Hurricane Rita roughly 4 weeks later resulted in severe damage to the housing stock and business structures, as well as severe damage to infrastructure and utilities (telephones, water, and electric power). This damage forced a long-term evacuation of a significant portion of the population and labor force.

The abnormal character of the Hurricane Katrina event makes for a compelling study of changing relationships.

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