The damage from Hurricane Katrina to the Gulf of Mexico’s oil and gas production facilities has had a huge impact on national and international oil and gas markets over the past two months. However, from a regional standpoint, the biggest economic impact from Katrina has been the loss of thousands of jobs, particularly in small businesses. A couple of recent articles reporting on the latest governmental statistics and reports from lending institutions provide a clearer picture of the extent of the economic carnage.
Two NY Times articles (here and here) from last week report on the extraordinary job losses in the Gulf Coast region resulting from the hurricane and the effect that such job loss is having on cities and financial institutions in the region. Louisiana and Mississippi lost a combined total of 310,000 jobs in September, which raised their unemployment rates to a United States high of 11.5% and 9.6% respectively. These are staggering job losses for the region, and since most the losses are attributable to small businesses that were either uninsured or underinsured in regard to damage from the hurricane, the restoration of those jobs will be a painfully slow process.

Meanwhile, the double whammy of Hurricanes Katrina and Rita are expected to result in at least $1.3 billion in bad loans for major financial institutions in the Gulf Coast region battered by the storms. While most of the damage came from probably uncollectible loans to now-defunct businesses and consumers who lost their jobs as a result of the storms, the banks also lost substantial revenue from fees and interest that were waived to ease the financial pressure on storm victims.
Hibernia Corp. was the hardest hit as it reported a third-quarter loss of $58.1 million (37 cents a share) compared with year-earlier profit of $76.5 million. Hibernia reported that the two storms cost it almost $200 million in the latest quarter, including a charge of $175 million to boost loan loss reserve. Hibernia also suffered another $35 million in property damage, a quarter of which was uninsured. Similarly, Citigroup Inc., which is the largest U.S. bank by stock-market capitalization, had $3.6 billion in loans in the Gulf Coast region and the bank announced last week that it expects $375 million of those loans — mostly consumer credit — not to be repaid.
New Orleans and the Gulf Coast region will slowly regain a portion of its lost jobs over the next 6-12 months as the region’s tourist business rebounds with the repair of convention and casino facilities. However, my sense is that a substantial portion of the jobs lost in the New Orleans area are gone forever. As a result, New Orleans business officials need to be concerned much more with promoting policies that will encourage job growth in their city than worrying about costly and unproductive (at least from a jobs standpoint) frivolities.