Louisiana's swamped economy

In 10 weeks, hurricane Katrina has swept Louisiana toward an economic recession - the fastest downturn to hit a state in modern times.

• The state's unemployment rate has spiked to 11.5 percent, the highest level for any state since the mid-1980s. Personal income is expected to drop 10 percent this quarter and continue falling next year.

• The Legislature began a 17-day special session Tuesday to eliminate $1.5 billion from the state budget. The options: laying off tens of thousands of employees and cutting expenses for everything from schools to wildlife enforcement.

• Pillars of the local economy are struggling. Oil and gas production on state land is still down more than 20 percent. Tourism remains a shadow of its former self, particularly with airline arrivals and departures less than 25 percent of normal levels.

In all, the state estimates that 41 percent of businesses in the state have been adversely affected by the storms.

Fixing the Louisiana economy presents policymakers - on both the federal and state level - with scores of vexing problems ranging from population loss to future land-use issues. Time is of the essence: Lawyers, doctors and working-class people who fled the state are now deciding whether to return to their beloved Cajun country or find jobs elsewhere. At stake is the future of an important economic engine for the nation.

"We're entering new economic territory here," says Greg Albrecht, chief economist for the Louisiana Legislative Fiscal Office. "I don't think we've seen anything that matches this except the San Francisco earthquake and fire [of 1906]."

True, billion of dollars in federal aid may break the fall of Louisiana's economy. The state will also get a boost from rebuilding, which should give jobs to carpenters, electricians, plumbers, and architects. Already, New Orleans employers are advertising for workers to do everything from gutting houses that reek of mold to ringing up sales at the local Talbots.

Indeed, areas devastated by hurricanes often get an economic lift from reconstruction. That's the case in Pensacola, Fla., which was hit by Ivan last year. Unemployment is now down to about 3 percent, and city revenues, bolstered by sales taxes on construction materials, are up more than 15 percent. "If we didn't have the construction and relief workers, I'm not sure what we'd be doing with our economy," says Tom Bonfield, city manager. "Tourism is pretty much way down, and we've lost 50 percent of our multifamily housing and 7 percent of our population."

Louisiana is hoping for a similar bounce. Mr. Albrecht estimates that on an annualized basis, personal income will be $14 billion lower in this quarter, but only $8 billion lower by the third quarter next year. Employment numbers are also expected to improve.

Through sheer determination, some businesses are already getting back up. One of those is Mossy GMC in New Orleans, whose annual automobile sales are usually about $42 million. Joe Mossy, president of the dealership, recounts how he had to buy a generator in Arizona, rewire the entire garage, and buy new computers and a paint bay. He's found and kept most of his employees. "Hopefully, the customer base will come back," says Mr. Mossy, proudly telling visitors that his business had sold its first car since the hurricane on Monday - its first day back in business.

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