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Hurricane Katrina Job Losses

Two experts discuss the unemployment fallout from Hurricane Katrina.

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  • JEFFREY BROWN:

    After Hurricane Katrina struck the Gulf region, today's unemployment report provided the first clues about its impact on jobs and offered a mix of good and bad news. On the plus side, the small rise in the national unemployment rate and the overall job loss of 35,000 was smaller than many economists had anticipated. On the negative side, of course, the hit to the Gulf region was huge.

    Today the Labor Department estimated that Katrina was responsible for the loss of 230,000 jobs. It said the exact number remains imprecise, since storm damage has made it impossible for the government to contact many work sites and households.

    The Gulf Coast is home to a number of industries hit especially hard. Many oil and natural gas refineries are still struggling to resume operations. Tourism, which generated $8 billion in revenue for New Orleans alone, has come to a grinding halt. And an estimated 5,000 commercial fishermen are out of work in Louisiana, just part of the Gulf's multibillion dollar seafood industry.

  • MAYOR RAY NAGIN:

    I don't think we can afford to lay back and keep doing the same things.

  • JEFFREY BROWN:

    This afternoon, New Orleans Mayor Ray Nagin said the city should create an expanded zone for tourism and casinos and revitalize the port, in order to bring jobs back.

  • JEFFREY BROWN:

    And for more on today's unemployment numbers I am joined from Baton Rouge by John Warner Smith, secretary of labor for the state of Louisiana; and by Mark Vitner, vice president and senior economist at Wachovia Bank in Charlotte, North Carolina.

    Mr. Smith, starting with you, how bad is the job situation in Louisiana post Katrina?

  • JOHN WARNER SMITH:

    Well, Jeff, we have processed over 250,000 unemployment insurance claims in the last five weeks. That's more claims than we actually processed all of last year. Our unemployment insurance trust fund is taking a big hit right now. We're probably going to pay out a billion dollars out of the trust fund over the next ten to twelve months. So it's quite an impact here in Louisiana.

    In addition, of course, the business community has been hit. We estimate that as many as 40 to 50 percent of our employee tax base have been directly impacted. So it's quite a hit.

  • JEFFREY BROWN:

    Mr. Smith, which jobs, which sectors are you most worried about?

  • JOHN WARNER SMITH:

    Well, it's really across the board. Every line of business has been impacted. We of course have experienced high claims in the hospitality and food service industry management level jobs, health care jobs, manufacturing, construction jobs, you name it. We've been hit across the board.

  • JEFFREY BROWN:

    Is it possible yet to say how soon any of these jobs will start coming back on line?

  • JOHN WARNER SMITH:

    Well, we're certainly working hard to find workers and to help businesses to meet their needs. We're actively involved in our work force development efforts, talking to the business community, taking job orders, conducting job fairs. We're actually working with the job seekers and helping them to match up with job opportunities. So the work is certainly cut out for us, but I'm optimistic that we're making some progress.

  • JEFFREY BROWN:

    Now, Mark Vitner, you look at the larger southeast region. How far do the job problems in the gulf spread?

  • MARK VITNER:

    Well, actually there are some offsets to the job losses in New Orleans and Mississippi, and some of the folks that lost jobs there have relocated to other cities, they've taken jobs in some other, in businesses there.

    We have also seen some of the businesses that were in New Orleans and Mississippi have relocated to other parts of the South. Ruth's Chris was headquartered in New Orleans and they have moved their headquarters to a suburb outside of Orlando, for example.

    So we are seeing that there are some offsets, I guess also in the gaming industry, a number of people that were displaced in the gaming industry are now working in Las Vegas or Atlantic City.

  • JEFFREY BROWN:

    Is it's possible to say yet whether these people will stay where they and keep those jobs?

  • MARK VITNER:

    I don't know that anything is permanent, but I think that they're likely to be in those jobs for quite some time, and I think the longer they're there, the less chance that they're going to move back to New Orleans or Mississippi. But certainly once things get going in Mississippi and Louisiana, we will see folks moving back there — maybe not necessarily the folks that have evacuated, but we may see folks from other parts of the country move there as job opportunities open up.

  • JEFFREY BROWN:

    Now, Mr. Vitner, nationally Katrina didn't seem to have as bad an impact on the job numbers as some thought. What does that tell you?

  • MARK VITNER:

    Well, it's still early, and the Labor Department admitted that they're having a great deal of difficulty figuring out exactly how many jobs were lost. And they have a relatively small survey that they conduct each month, and since the hurricane hit late in the month of August, it's possible that some people that lost their jobs were still counted as employee during the September employment period. So we could see some weakness carry over into the October data or into the November data, and then of course the data gets revised several times.

  • JEFFREY BROWN:

    And if you look, though, nationally at the larger picture, what sectors stood out as doing particularly well or not so well right now?

  • MARK VITNER:

    Well, we saw a lot of growth in business in professional services; a lot of that was in temporary services. We're seeing continued gains in construction. And some of that may reflect the recovery efforts; I think it may be a bit too soon to see it there, the biggest losses were in retailing and the tourism and hospitality industry and those did seem to be mostly due to the hurricane, although there was a large grocery chain that closed a number of stores throughout the South unrelated to the hurricane, which accounted for nearly 30,000 job losses by itself.

  • JEFFREY BROWN:

    And Mr. Smith, back to you, those jobs that we were just talking about where people have moved away from your region and found jobs elsewhere, do you worry that these people will not come back, that these are jobs that you just might not get back, people that you might not get back?

  • JOHN WARNER SMITH:

    Well, of course, it's a concern. But we're concentrating on actually getting them back. And I think certainly there's going to be a number of people who won't come back. But we actually have a database within our unemployment insurance program. We've got the names of our claimants. We've got their addresses, and we've offered to intervene on behalf of the employers of the state who have been impacted to find those employees, those workers. And we're reaching out in all sorts of ways to reach them.

    And again, we think that certainly most of them will return, and find suitable employment in the state.

  • JEFFREY BROWN:

    Mr. Smith, there have been some ports that you may have to begin cutting unemployment benefits at some point. Does the state have enough money to face this task of paying the benefits?

  • JOHN WARNER SMITH:

    We do have a strong trust fund. We had actually started a balance in September of a balance of $1.5 billion; again we project that that balance will dwindle to about $500 million within 12 months. And we have certain provisions within our statutes, our tax laws that cause certain triggers to occur to protect the integrity and solvency of the trust fund.

    And at the $500 million mark, taxes, business taxes will rise, the taxable wage base will increase, and benefits will go down to some degree — weekly benefits for workers. But we've got several things working to offset that. We have pushed very hard for federal legislation. We have in fact proposed to the federal government that they reimburse our state trust fund 100 percent of these claims.

    I learned earlier today that there's a bill moving through Congress right now sponsored by our congressional delegation that will provide about $400 million of relief to the state immediately upon passage. That would also soften the blow somewhat and perhaps would stop those triggers from occurring, and thus would stop any tax increase, avoid any reduction in the weekly benefits to our workers.

  • JEFFREY BROWN:

    And, Mr. Vitner, one last brief question. As you look forward here and the rebuilding gets under way, does that have the potential to help the job picture both regionally and nationally?

  • MARK VITNER:

    I'm not as optimistic about how much help the rebuilding efforts are going to bring the economy. The unemployment rate nationwide is at 5 percent, which is very close to full employment. And a lot of the rebuilding activity is going to be in construction businesses, where activity is incredibly strong right now.

    And what I'm afraid is going to happen is that the federal government in their zeal to show some progress in the rebuilding efforts in New Orleans is going to bid up the cost of construction materials and really crowd out a lot of construction that would be taking place in other parts of the country.

    So I don't know that we're going to see any net gains in economic activity and employment from the rebuilding efforts. I think that certainly that New Orleans and Mississippi will be better off, but it's probably going to come at the expense of projects that would have been built in other parts of the country.

  • JEFFREY BROWN:

    All right, Mark Vitner and John Warner Smith, thank you both very much.