Employment and Self-Employment in the Wake of Hurricane Katrina

Abstract

Year 2005 brought four severe hurricanes to the U.S. Gulf states, including Hurricane Katrina, an exceptional storm in terms of its magnitude of destruction. The authors examine the short- and long-term effects of Hurricane Katrina on the labor market outcomes of prime age individuals in the states most affected by the hurricane and for evacuees using data from the monthly Current Population Survey. They find that in the states most affected by Hurricane Katrina-Alabama, Florida, Louisiana and Mississippi-employment and unemployment by the end of 2006 were at similar rates as the end of 2003 with the exception of Mississippi, which still had lower employment and higher unemployment at the end of 2006 compared with pre-Katrina levels. By one year after the hurricane, evacuees that returned to their pre-Katrina state of residence have labor force participation rates and unemployment rates at the same level or near that of non-evacuees. Evacuees that relocated (non-returnees) have lower employment rates and higher unemployment rates, both immediately following the hurricane and one year later. Self-employment rates are higher for returning evacuees in all states compared with non-evacuees in those states in the months immediately following the hurricane but are no different one year later. There is some evidence of higher self-employment rates among non-returnees that may be due to poor job prospects in the wage and salary sector or due to new opportunities for starting businesses in the wake of hurricane Katrina.