New Orleans economy bucks the national trend
New Orleans has always marched to its own tune, but lately the city is even more out of step with the rest of the nation in terms of the economy. And that’s a good thing.
While the nation is facing one of its toughest economic challenges in decades, New Orleans seems to be bucking the trend with rising employment, increases in average wages and a surge of recovery spending related to Hurricane Katrina. In fact, the very disaster that bought the city to its knees almost four years ago, has inoculated it from the worst of the recession, say experts.
“The most telling fact is that for each of the next three years we are going to receive between $10 billion and $20 billion of overall infrastructure investment monies. And that includes everything—both public and private investments,” says Michael Hecht, president and chief executive officer of Greater New Orleans Inc., a regional economic development organization. “And that compares to a typical level of between $1 billion and $2 billion per year.”
Hecht expects those recovery jobs to sustain the area through the worst of the national downturn. So far, the numbers bear that out. Employment in the New Orleans metropolitan area grew 2.5 percent in the fourth quarter last year, while the number of jobs nationally fell by 1.4 percent. For the first month of the year, unemployment in the area was around 5.5 percent, while it rose to 8.1 percent nationally. BusinessWeek magazine even ranked New Orleans among the top 10 cities best suited to ride out the recession.
“We’re holding our own,” says Heidi Charters, research analyst for the University of New Orleans Division of Business and Economic Research. “What happened is that we took an enormous hit during Katrina. What we’ve got left is pretty stable, and we’ve been growing out of our Katrina trough very slowly.”
She estimates that roughly 88 percent of the population of the metropolitan area is back compared with pre-Katrina levels. However, overall employment spending is up so that the population is earning 109 percent of the wages earned in the summer of 2005. Average weekly wages have risen 22 percent from June 2005 to June 2008, Charters says.
“If you stayed or if you came back—in general—you’re getting paid more,” she says. “As a result, retail sales are still up around 10 percent from before the storm.”
Just how long the city can sustain the growth is anyone’s guess. Charters says that the national downturn will likely have an impact on tourism. She doesn’t expect people to suddenly stop visiting the city, but she does foresee a 5 to 10 percent decrease in the number of visitors this year as people curb leisure travel. The price of oil is also a big factor in the local economy because so many jobs are tied to drilling and energy. Taxes from oil revenues are a big source of income for the state government. Oil has fallen from more than $100 a barrel last year to around $50 per barrel.
Charters says that even though the city is doing relatively well, consumers here could also start to scale back spending due to unease over faltering 401(k) retirement funds and the uncertainty over the national economy. “I think a lot of people are just being cautious,” she says.
Is there anything consumers and business owners can do to help the New Orleans economy prosper?
Experts say it’s difficult to measure how individual behaviors can affect something as large as a city economy, but people can do small things that can make a difference to local businesses.
Spend locally. Charters says that the biggest impact consumers can have is to be mindful of where they spend their dollars. A dollar spent at a locally owned store circulates through the local economy at least three times compared with national companies where the profits are funneled outside the community. “Buy local products, local produce and patronize the small businesses that tend to suffer during the downturn,” Hecht says.
Play politics. Good, honest government fosters an environment where companies feel comfortable investing.
Hecht says more people should get involved in the political process to advocate for a better business climate and strong economic development policies. “One of the mistakes that we have made in New Orleans for many, many years is that, as a business community, we have not taken a leadership role in economic development,” Hecht says. “We have really abdicated that responsibility and left it to the politicians. The most important thing that a business owner can do to try to help drive the local economy is stand up and make themselves heard on issues that affect their bottom line. Take an active role in the economic development process.”
Pitch in. The many charitable relief organizations that are helping families rebuild their homes after Katrina still need help.
Invite your friends. Tourism is one of New Orleans’ most important industries, which employs 70,000 people and creates one third of the city’s operating budget. Tourism officials are bracing for the summer slow season, which means it’s a great time to convince friends in far-off places to take advantage of some of city’s discount hotel rates. Kelly Schulz, spokeswoman for the New Orleans Metropolitan Convention & Visitors Bureau says her organization plans to list links to hotel specials on its Web site all summer.
Act like a tourist. Make a point to patronize downtown and French Quarter shops, restaurants and art galleries.“We encourage locals to enjoy ‘staycations’ and all the great things there are to do right here at home,” Schulz says. “Especially during the tough economy, we need to support our local businesses and attractions, particularly those that rely on tourism for their survival.”