By Mohammad Iqbal
A preliminary assessment of the damages to the states of Mississippi and Alabama show that the economic impact of Hurricane Katrina could be enormous. High winds and the storm surge from Katrina inflicted catastrophic damage across the Mississippi Gulf Coast. The counties that are more seriously affected in Mississippi include Biloxi, Gulfport, Long Beach, and Pass Christian. Covington, Lamar, Simpson, Jones, and Forrest counties were spared from Katrina's storm surge, but still seriously suffered from her rains and winds. In Alabama, the most seriously affected areas fall in Baldwin and Mobile counties.
It is believed that in the seriously affected coastal areas, almost 90% of the structures are completely ruined, including homes, businesses, and industries. It will take some time to know the exact cost of rebuilding those structures and getting the affected businesses up and running. It is, however, likely to be in billions of dollars.
Leisure and tourism are the major sectors directly affected by the hurricane. The damage to twelve Mississippi casinos is of enormous magnitude and it may take some time to revive them. These casinos employed 14,000 workers and paid about $500,000 in gaming tax revenue daily. Without doing a full impact assessment, it can be seen that the closing of the casinos could have a prolonged effect on employment and gross state product in the state. Mississippi already has one of the highest unemployment rates in the nation, which is estimated at 6.5% in July 2005, compared to 5.4% for the nation.
A February 2005 report from the tourism division of the Mississippi Development Authority indicates the importance of tourism to the Mississippi economy. During fiscal 2004, tourism accounted for 92,400 employees, representing direct jobs only. These direct jobs form 8.3% of the total nonagricultural employment in the state. The private sector employs 98.5% of these workers. Annual payroll for the 92,400 jobs in the mostly private tourism sector was $1.7 billion in fiscal 2004, and employment in the sector grew 1% from fiscal 2003 to fiscal 2004. According to the National Restaurant Association, Mississippi's restaurant industry was poised for a strong, positive outlook in line with the strong tourism sector in the state. Mississippi's restaurants were expected to post sales of $2.6 billion in 2005, a 4.9% increase from 2004. This estimate will likely be revised significantly downward.
In Alabama, transportation is the major sector to be affected. Hurricane Katrina devastated the Alabama state docks in Mobile, smashing barges, flooding warehouses, and inundating piers at the 12th largest port in the country. The Mobile ship canal was closed to vessels over 200 tons. The damage also puts a temporary crimp in the $9-billion-a-year export business that sends Alabama's coal, medical instruments, chemicals, and timber around the globe. There has been damage to the cargo as well. This disruption in shipping activity, however temporary, could put a significant dent in the gross state product of Alabama. The employment impact in the case of Alabama, however, will be small.
When the rebuilding begins, a positive employment impact will be seen in construction and related sectors for both Alabama and Mississippi. This re-building activity will also result in an increase in the gross state product.
