Employment and self-employment in the wake of hurricane Katrina

Abstract

We use data from the monthly Current Population Survey to examine the short- and longer-term effects of Hurricane Katrina on the labor market outcomes of prime-age individuals in the most affected states-Alabama, Florida, Louisiana, and Mississippi-and for evacuees in any state. We focus on rates of labor force participation, employment, and unemployment, and we extend prior research by also examining rates of self-employment. With the exception of Mississippi, employment and unemployment one year after the hurricane were at similar rates as the end of 2003. This aggregate pattern of labor market shock and recovery has been observed for other disasters but masks important differences among subgroups. Those evacuated from their residences, even temporarily, were a harder-hit group, and evacuees who had yet to return to their pre-Katrina state up to one year later were hit especially hard; these findings hold even after controlling for differences in observable characteristics. We also find evidence of an important role for self-employment as part of post-disaster labor market recovery, especially for evacuees who did not return. This may result from poor job prospects in the wage and salary sector or new opportunities for starting businesses in the wake of Katrina.