Katrina Wipes Out Job Gains

Hurricane Katrina is erasing recent job gains and threatening an economic recovery that has been one of the few bright spots for President Bush.

The storm is expected to cut employment by 400,000, according to a Congressional Budget Office forecast issued Wednesday. Some private estimates have been even higher, putting potential job losses at close to 1 million.

Such projections clearly shake administration and congressional leaders. There’s little they can do, short of massive public works construction projects like those of the Great Depression, to replace so many jobs.

While history suggests that New Orleans and other battered Gulf Coast communities will be rebuilt, the damage was so extensive that it poses longer-term dangers to the economy.

“In past natural disasters, most people were able to go back to the jobs they had and to live, either in makeshift places or their own homes, near those jobs,” said Lee Price director of research for the Economics Policy Institute, a labor-funded research group.

“That’s not going to happen this time. We’ve got hundreds of thousands of people who had jobs who had to flee who don’t have a job now or a place to live. There are wide areas where nobody is going to be able to live or work,” Price said.

The CBO report, the government’s first assessment of the national economic impact from Katrina, also projected that the storm would slash economic growth by as much as a full percentage point this year and result in a surge in gasoline prices of possibly 40 percent this month.

Before the hurricane, private economists were forecasting growth in the second half of this year would come in between 3 percent and 4 percent following growth of 3.6 percent in the first half. That had provided a bit of good news for Bush, whose job approval ratings in recent opinion polls have hit the lowest levels of his presidency.

Even counting the job losses will be daunting, said Tom Nardone, chief of the household employment section of the Labor Department’s Bureau of Labor Statistics.

“We’re still making plans on how we’re going to do the next survey,” Nardone said in an interview. The jobs report for September is due out in early October.

But, Nardone said, “New Orleans has been evacuated and we’re not going to be able to assess those households. And there are other areas where it is going to be tough to get in touch with people.”

Nardone said it’s far too early to say whether reconstruction employment will eventually add more jobs than were lost.

Robert Reich, who was labor secretary in the Clinton administration and is now a professor of economic and social policy at Brandeis University, predicted “long periods of unemployment” for many of those forced from their homes by the hurricane.

And he said the new reconstruction jobs that will be created are not ones that likely can be filled by most of the displaced.

“We’re going to have to have a massive program to get these people permanent housing, ideally near or in their former communities, to get them jobs, to help restart businesses and to provide transportation,” Reich said.

He suggested a federal program on the order of the Work Projects Administration of the 1930s was needed.

The current labor secretary, Elaine Chao, was far more upbeat, predicting that New Orleans would see “one of the biggest construction booms that they have ever seen.”

“I have seen this in previous catastrophes and hurricanes _ there is a bright spot in that new jobs do get created,” Chao told CNBC.

Her comments came after some, including House Speaker Dennis Hastert, R-Ill., voiced reservations over whether rebuilding the city _ most of which lies below sea level _ was worth the cost.

Democrats in the early stages of the 2004 presidential race made a point of saying that Bush was on track to be the first president since Herbert Hoover to preside over a net loss of jobs.

At this time a year ago, Democrats could point to a loss of 1.6 million jobs during Bush’s presidency. But even then, jobs were beginning to trickle back. By the time Bush was sworn in for a second term, he could claim a net gain of 127,000 jobs during his first four years.

August’s job gains were 169,000, which was close to the average for the past eight months, and just slightly above the 150,000 monthly gain that economists say are needed to keep pace with population growth.

Some economists suggest that, in the long run, jobs lost to the storm will come back or be replaced by other jobs.

“It depends on your time frame. For the next few months, it’s decidedly a negative event. But in a year or so, the effects will likely have faded,” said Mark Zandi, chief economist for Economy.com, a Philadelphia-area economic consulting firm.

But Earl Black, a political scientist at Rice University in Houston who studies Southern politics, said the impact on jobs and the region’s economy _ especially for New Orleans itself _ will be “very, very long term.”

“New Orleans did not have a robust economy to begin with. I think it’s going to be very difficult for New Orleans to truly come back. It will take years,” Black said.

Forecasting the ultimate impact on jobs and the economy “is all guesswork” at this stage, said economist Larry Chimerine, president of Radnor Consulting.


Tom Raum has covered Washington for The Associated Press since 1973.

© 2005 The Associated Press