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Abstract

Analysis of data on the effects of Hurricane Katrina on the labor market experience of individuals ages 25–64 in Alabama, Florida, Louisiana, and Mississippi shows that the aggregate detrimental labor market effects of natural disasters may be short-lived. One year after Katrina, the percentage of people working or looking for work in the Katrina-affected states had rebounded to earlier levels except in Mississippi. But these aggregate patterns mask important differences for some groups affected by the hurricane. For example, evacuees who did not return had higher labor force dropout and unemployment rates but also the highest rates of self-employment up to one year later.

The estimated $100 billion in damages from Hurricane Katrina in August 2005 is just one gauge of the hurricane's economic effect. Another important consideration is its effect on labor markets. Natural disasters usually involve temporary disruptions to the local economy through direct and indirect effects on local infrastructure, business structures and other business capital, residences, and the population, especially the workforce. Decisionmakers who are guiding economic recovery in the Gulf States and those who must consider how to handle future disasters need to know how Katrina affected local employment levels generally and how it affected workers and their jobs, including, more specifically, those displaced to other regions.