What New York Can Learn About COVID-19 Recovery From Hurricane Katrina

James Orr, associate director of the Economic Studies Group (inset, courtesy of Orr); a shuttered storefront (Credit: Getty)

For months, New York has been the epicenter of the coronavirus pandemic. The devastating effects, from soaring unemployment to lives lost, are being likened to those of war. When and how to reopen the city and state economies and how long they will take to recover are pressing questions. 

In a recent article, James Orr, a visiting scholar at The Graduate Center and associate director of its Economic Studies Group, and Graduate Center doctoral candidate Zhuo Xi (Economics) addressed these issues. They shared insights gleaned from analyzing the effects of prior economic shocks and disasters, including Hurricane Katrina in New Orleans. 

Orr, who previously served as a vice president of the Federal Reserve Bank of New York, answered questions about the findings and his predictions. 

The Graduate Center: You compare the effects of the COVID-19 crisis on employment in New York City with the way Hurricane Katrina affected employment in Louisiana and New Orleans. How is the COVID-19 crisis similar to a natural disaster like Hurricane Katrina?

Orr: Both COVID-19 in New York and Hurricane Katrina in New Orleans led, tragically, to hospitalizations and the loss of lives and to the mass filings of claims for unemployment insurance in the weeks immediately following the events.  The stay-at-home order in New York and the damage and population loss in New Orleans caused sharp and sudden job declines in a similar set of consumer sectors, including retail stores, restaurants, hotels, museums, and personal services.  

GC: How do you rate the federal responses to the two crises? How much of an impact will the CARES Act have on New York state and New York City?

Orr: The federal fiscal response to Hurricane Katrina largely focused on the immediate emergency needs of the affected population for food and housing. The federal fiscal response to the COVID-19 pandemic is designed to provide much broader support throughout the economy. The largest spending bill is the CARES Act, about 10 percent of GDP. Benefits to New Yorkers include cash grants to many residents, expanded benefits for laid off workers, loans to small businesses, especially important for New York City, and financial support for hospitals and state and local government budgets. 

GC: New Orleans’ population remains at 20% below its pre-Katrina level, and employment has still not fully recovered. How does New York City avoid such a fate after COVID-19?

Orr: Initially, a v-shaped recovery was taking hold in New Orleans as half of the job losses were recouped in about a year. But the mandatory evacuation order for the area and the destruction of homes, businesses and infrastructure meant employment would be unlikely to return to its pre-Katrina level. For New York, workers and business owners have borne the brunt of the impact while infrastructure, stores and workplaces remain largely intact. So, the scenario of a permanently smaller job base in the city seems less likely.  

GC: Is there anything else you’d like to add?

Orr: While COVID-19 poses unique challenges to the New York state and city economies, the resilience shown in the response to the 9/11 terror attack and the Great Recession suggest the potential for an ultimate recovery.


Submitted on: MAY 13, 2020

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