Economic Impacts of Natural Disasters

Published: 2019-11-28 08:00:00
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The increasing world population, environmental degradation, and climate change have resulted in escalating natural disasters over the years. Apart from the natural disasters increasing in frequency, they have also become deadlier and hence costlier. Such aspects are evident in the aftermath of Hurricane Katrina which had a devastating effect on New Orleans and the entire Gulf coast of the United States. In the aftermath of the hurricane, nearly 80 percent of New Orleans was flooded, and more than 1000 people died (Nelson, Ehrenfeucht, & Laska, 2007). Besides affecting the human, psychological and social fabric of the city, the storm had a significant impact on its economy, its individual businesses, and its labor market dynamics. Since the estimated damages were more than $100 billion, Hurricane Katrina became one of the costliest natural disasters that ever struck the United States.

To have a better understanding of the economic impacts of the storm on New Orleans, it is essential to focus on the major economic forces powering the city. The New Orleans economy predominantly relies on tourism, educational services, and port operations, which form a foundation of its economic activities (Dolfman, Wasser, & Bergman, 2007). Tourism in the city encompasses areas such as arts, entertainment, and recreation which made New Orleans among the most visited cities in the United States. Besides the arts, entertainment and recreation, the internationally recognized restaurants and first class accommodation attracts many tourists to the city. The second foundation of the citys economy is educational services. The city serves as a center of higher education with institutions such as the University of New Orleans, Tulane University, Xavier University of New Orleans, Louisiana State University Medical School, Southern University of New Orleans, and Dillard University attract a significant number of students in the city (Dolfman, Wasser, & Bergman, 2007). Lastly, port operations mainly deal with mining, transportation, and warehousing. Chief exports from the port include petroleum products that are mined in the Gulf of Mexico and foodstuffs from Midwestern farmers (Dolfman, Wasser, & Bergman, 2007). Other than the three sectors that form the foundation of New Orleans economy, many other sectors such as construction, healthcare, social services, and manufacturing were adversely affected.

Before the storm, tourism was the bright spot of the citys economy. From 1990 to 2004, jobs in the New Orleans tourism sector grew by 33 percent and the growth continued to the months before the storm (Chacko & Marcell, 2008). After the hurricane, the industry was hard hit and experienced the most job losses in all the economic sectors in the city. Two years after Katrina, the tourism industry had lost more than 22,900 jobs and approximately $382 million worth of wages (Chacko & Marcell, 2008). On the other hand, even before the hurricane, the educational services sector of New Orleans was slightly unstable. In the aftermath of the storm, the sector reached its lowest point and resulted in many people losing their jobs. The sector lost more than 1,910 jobs, which amounted to approximately $66.4 million loss of wages (Sims, & Rossmeier, 2015). However, by May 2006, the sector had recovered steadily and almost reached employment levels before the disaster (Sims, & Rossmeier, 2015). Finally, Port operations in the city were severely affected by the hurricane. While the sector had added jobs before the storm, approximately 3,500 people lost their jobs because of the destruction caused by the hurricane (Dolfman, Wasser, & Bergman, 2007). Due to the higher wages in port operations as compared to other sectors, the financial impact was disproportionately higher. The total lost wages in the sector amounted to about $136.1 million (Dolfman, Wasser, & Bergman, 2007). Apart from the three main economic sectors, significant job losses were experienced throughout many other sectors that make up the citys economy.

From the details above, it is evident that loss of jobs and wages was a significant effect of the hurricane Katrina on the residents of New Orleans. Nonetheless, the foundational economic sectors recovered due to federal and state relief programs that aimed to prevent further economic losses (Nelson, Ehrenfeucht, & Laska, 2007). Despite a lackluster economy in New Orleans before the hurricane, the structure of the economy remained with the trio sectors of tourism, education and port operations as foundations of the economys strength. The tourism industry maintained its position not only because of the physical structures but also due to the various manifestations of New Orleans history in the lives of its residents (Chacko & Marcell, 2008). In the educational services sector, there has been a steady increase in the overall employment in the citys universities and colleges attributable to the increasing number of students pursuing arts, recreation and entertainment as hospitality and accommodation related courses. Finally, advancement in technology in ports over the years enhanced port operations and extended employment in the sector. New Orleans employment levels declined after the hurricane but continued to rise due to government relief programs and other interventions resulting in a quick recovery of the economy.

Natural disasters can have devastating impacts on various sectors of the economy. These impacts lead to the destruction of business premises, loss of jobs and wages, and strain on financial resources to rebuild various sectors of the economy. The hurricane Katrina massively disrupted New Orleans residents in different ways. The main foundations of the economic sectors of the city were massively and unexpectedly disrupted leading to many people losing their jobs and wages. However, the economy recovered quickly due to federal and state relief programs that aimed to prevent further economic losses. Undoubtedly, natural disasters can have devastating effects on the economy. Government and other assistance programs should be promptly initiated in case of natural disasters so to reduce the economic losses experienced in the aftermaths of such events.


Chacko, H. E., & Marcell, M. H. (2008). Repositioning a tourism destination: The case of New Orleans after hurricane Katrina. Journal of Travel & Tourism Marketing, 23(2-4), 223-235.

Dolfman, M. L., Wasser, S. F., & Bergman, B. (2007). Effects of Hurricane Katrina on the New Orleans Economy, The. Monthly Lab. Rev., 130, 3.

Nelson, M., Ehrenfeucht, R., & Laska, S. (2007). Planning, plans, and people: professional expertise, local knowledge, and governmental action in post-Hurricane Katrina New Orleans. Cityscape, 23-52.

Sims, P., & Rossmeier, V. (2015). The state of public education in New Orleans: Ten years after hurricane Katrina. New Orleans, LA: Tulane University Cowen Institute.


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