Initially, Katrina was formed over the Bahamas as a tropical depression. During the time of its formation, it was in Florida where it caused some flooding. Two people were killed there and during the first landfall it appeared to be a hurricane. Katrina weakened after its passing of Florida, and then was reorganized as a tropical storm.
The hurricane had a severe impact on the country’s economy. Average costs of all damages made by Katrina were between $100 and $125 billion. Insured losses were evaluated between $40 and $66 billion. An estimated 300,000 homes were destroyed and many of the people became homeless.
Bernard Weinstein, professor from the University of North Texas, evaluated the overall economic loss effect of the hurricane in $250 billion. He added not only total economic losses and damages, but also the impact on disrupted gas production and national economic growth. According to the professor, in 2005, economic growth that was measured by Gross Domestic Product (GDP) decreased from 3.8% to 1.3% at the time when Katrina hit New Orleans. The fourth quarter of 2005 (October-December) was especially hard, as the production losses were felt. Although GDP level was still rather high, as the economy was growing, Katrina influenced mainly the state and the local economy.
In order to fully understand the influence of the hurricane of the New Orleans economy, one must know the economic forces of the city and what role it had in macroeconomic sense. New Orleans is widely known for its export of the food products, education services, etc. Its economy initially can be compared with the table that has three foundational legs of tourism, port operations, and educational services.
In terms of employment, tourism gave a wide sector of jobs for its population. Firstly, Katrina caused great population losses, and the tourism experienced massive deprivation in employment. During a year following the hurricane, industry losses were estimated to 23,000 of jobs and $390 million in wages. Tourism, including arts, entertainment, and food service was recognized one of the main industries of the city. It was one of the most visited cities in the United States. New Orleans’ French Quarter, internationally popular restaurants, first-class apartments has lured thousands of tourists. Katrina hurricane affected and stopped a series of the celebrations that included the New Orleans Bowl, the Sugar Bowl, and the New Orleans Jazz and Heritage Festival.
According to port operations, the employment was affected even more severely by Katrina, as this sector had also added a great amount of jobs. The overall financial impact of job losses in this sphere was even higher, as port operations were the foundation of export and import of the city. Port operations lost 4,000 of jobs and approximately 37 millions of dollars. In case of educational losses, financial damage has reached the point of 2,000 jobs and $70 million. Port operations, including transportation and warehousing, have greater economic importance for New Orleans. In combination with the Port of South Louisiana that is located nearby, the Port of New Orleans handled a great amount of export-import operations.
Complementary to the overall loss level, professional, scientific, and technical services can be considered. In 2005 before the hurricane, the professional, scientific, and technical sectors experienced a loss of jobs too. During that year, the sector losses were approximately of 1,700 jobs overall, and the losses of wages were about $85 million. As the New Orleans economy in general, the above-mentioned sectors faced a great decline after the hurricane, but demonstrated a market improvement that year in September.
Additionally, it is considered as an important part for the country’s economic life to remember the effect on the national output. Globally, it presents a drop in the normal level of employment, capital, and labor hours. The GDP effect of Katrina was reflected in the third and past quarter of the year, as its economic results could be seen only after a few months. Its level decreased by 2% in comparison with the previous year. It should be noticed that Katrina did not influence GDP in a devastating way. It quickly recovered with the help of the other states. Increased spending for the recovery compensated some of the losses and gradual rebuilding increased it. Several regions provided help to the victims, who also received governmental relief and obtained the employment in temporal city.
Even with more than 100,000 homes destroyed, their reconstruction added points to the total level of housing starts. In 2004, the Census Bureau had reported approximately 2 million total new housing starts.
Another issue that was caused by Katrina was an environmental devastation and destruction of the coastal wetlands. Wetlands were the first problem sharpened by the hurricanes Katrina and Rita. Wetlands are very important for New Orleans due to the following reasons:
· Supporting a wide range of plants and animals
· Slowing and absorbing floodwaters
· Filtering the groundwater out of pollution
These wetlands along the coast were mangled by oil and gas development. As the cause of it, sea levels raised. The dams that were devastated, contributed to erosion additionally. Those dams prevented the river from overflowing its banks. Before Katrina, Louisiana’s wetlands also lost nearly 10-14 square miles a year because of those devastating processes. Hugh Kaufman, senior policy analyst, also evaluated the impact of Katrina. According to him, environmental regulations for preventing the types of discharges that occurred were not enforced at all. It made this situation even worse because unchecked development of ecologically sensitive parts put a stress on environment’s ability to recover itself and dispel chemicals.
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