|Gulf Coast Economic Recovery Remains Mixed|
MCLEAN, Va.--(BUSINESS WIRE)--Oct. 9, 2006--Employment statistics,
sales tax collections, large construction projects and other key
economic indicators point to an accelerating recovery in many Gulf
Coast communities damaged by hurricanes Katrina and Rita in 2005.
Economic growth driven by construction and manufacturing in
Pascagoula, Miss., and Lake Charles, La., parallels the aggressive
recovery patterns that most regions encounter following a major
natural disaster. Yet despite these improvements, the economic impact
of Hurricanes Katrina and Rita continued to negatively affect key
cities in the Gulf Coast region through the second quarter of 2006.
Floodwaters from Hurricane Katrina, widespread lack of flood
insurance and the ensuing slow-paced development of programs to aid
housing repair or replacement are key reasons for slower recovery in
two parishes, Orleans and St. Bernard.
These results are reported in "Advancing in the Aftermath III:
Tracking the Recovery from Katrina and Rita," a study by noted
economist Dr. Loren C. Scott and sponsored by Capital One, N.A.
Construction helps drive recovery
Economic recovery is accelerating in heavily damaged
Biloxi-Gulfport, Miss., where programs have been implemented to assist
homeowners and businesses rebuild. By contrast, planning such aid
programs took much longer in the New Orleans area, where flood waters
that lingered for weeks heavily damaged large portions of Orleans and
St. Bernard parishes. Residential grant programs in those areas were
only recently finalized and the distribution of funds is just
beginning in New Orleans.
"Much of the recovery to date has been driven by construction in
communities where money is available for repair and replacement of
damaged structures and housing is available to accommodate an
expanding work force," Scott said.
On Mississippi's Gulf Coast, Scott pointed to casinos in
Biloxi-Gulfport and shipbuilding in Pascagoula as examples of
progress. Scott said that legislation allowing casinos to be built
along the shore rather than on the water and Gulf Opportunity Zone
assistance programs provide strong incentives to accelerate rebuilding
and new casino developments.
"In the Lake Charles area, where there was storm damage but little
flooding from Hurricane Rita, the construction and manufacturing
sectors are moving ahead and creating positive results for the local
economy," Scott explained.
The report also cites University of New Orleans research findings
that construction projects in the New Orleans area which would
normally provide 28 years-worth of building activity are currently
scheduled for completion in just the next few years.
"Rebuilding public schools and other institutions is another
example of how construction leads recovery," Scott said. "But housing
for the work force is still an issue that must be resolved before
construction can take economic recovery to the next level."
Overall, the report states that large industries and
manufacturers, including shipbuilding operations and ports, have
recovered faster than small businesses. For example, in Pascagoula,
Northrop Grumman's Ingalls Shipyard has new Navy contracts, and its
total employment is just 1,000 jobs short of its pre-Katrina
employment peak of 13,000.
The quarterly economic study by Scott attempts to benchmark the
recovery of the hurricane-impacted regions of Louisiana and
Mississippi. The full report is available at
www.lorenscottassociates.com. Scott is professor emeritus of economics
at Louisiana State University and president of Loren C. Scott &
About Capital One
Headquartered in McLean, Virginia, Capital One Financial
Corporation (www.capitalone.com) is a financial holding company, with
more than 324 locations in Texas and Louisiana. Its principal
subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto
Finance, Inc., and Capital One, N.A., offer a broad spectrum of
financial products and services to consumers, small businesses and
commercial clients. Capital One's subsidiaries collectively had $47.2
billion in deposits and $108.4 billion in managed loans outstanding as
of June 30, 2006. Capital One, a Fortune 500 company, trades on the
New York Stock Exchange under the symbol "COF" and is included in the
S&P 500 index.
Advancing in the Aftermath III: Tracking the Recovery from Katrina
The quarterly study by Dr. Loren C. Scott and sponsored by Capital
One, N.A., Advancing in the Aftermath III: Tracking the Recovery from
Katrina and Rita, attempts to benchmark the recovery of the
hurricane-impacted regions of Louisiana and Mississippi. The full
report is available at www.lorenscottassociates.com. Scott is
professor emeritus of economics at Louisiana State University and
president of Loren C. Scott & Associates, Inc.
Employment trends were among 12 key economic variables tracked in
Scott's study (other economic indicators include housing
reconstruction and repair, healthcare and hospitals, airport traffic
and casino performance). Scott's study highlights economic recovery
benchmarks for the following areas affected by hurricanes Katrina and
New Orleans MSA
Lake Charles MSA
- Within the seven-parish New Orleans MSA, Orleans and St.
Bernard parishes remain the most affected and slowest to
recover from Hurricane Katrina. In the New Orleans MSA,
515,249 homes were damaged by the storms, and 204,757 were
left uninhabitable. The widespread flooding in these areas
also has impeded recovery on a number of fronts, including
difficulty of repairs and insurance settlement issues. Only 26
percent of homeowners in the New Orleans MSA had flood
- Road Home funds from the federal government intended to help
fill the gap between insurance compensation and the actual
cost of repair or replacement of a home were not available
until April. The first checks were not issued until September.
- Employment has been on the upswing with the New Orleans MSA
adding jobs at an average rate of 4,200 per month in the
second quarter before slowing to an average of 450 per month
over the past two months. Big companies are moving ahead with
employment faster than smaller companies. Construction
employment is slowly rebuilding. The pace is slow, according
to Scott, because of the time it is taking for insurance funds
to flow into the market, a dramatically reduced population, a
shortage of labor exacerbated by the vastness of the
destruction and the slow pace of federal aid. New large-scale
construction projects have been announced but not started.
Examples are $963 million for a new six-lane I-10 span over
Lake Pontchartrain between eastern New Orleans and Slidell and
$660 million to widen the Huey P. Long Bridge over the
Mississippi River. Several new condominium projects and the
rebuilding of public schools and other institutions will help
account for the equivalent of 28 years of construction
spending currently planned for the near term in the MSA,
according to University of New Orleans research cited in the
- Hospitals and healthcare are still on the critical list in New
Orleans and St. Bernard, although other parishes in the New
Orleans MSA have reopened most of their facilities. All areas,
however, still face shortages of doctors and other healthcare
professionals, according to Scott.
- Revenue at the area's casinos is up dramatically, increasing
more than 30 percent from the same period a year ago for each
of the gambling operations in the New Orleans MSA.
- Only 13 percent of the St. Bernard schools are open; 43
percent in Orleans parish. Most schools in other parishes
within the MSA sustained less damage and are fully
- Hotel occupancy is stabilizing, and the area has recovered
about 75 percent of pre-Katrina hotel rooms, according to
- Sales tax collections in each month since the storms have been
higher than the corresponding month of 2005, except in Orleans
and St. Bernard parishes.
- The Port of New Orleans is operating at pre-Katrina total
tonnage levels. Break-bulk cargo is up 28 percent, but
container cargo is down 33 percent because of damage to
facilities on the Industrial Canal. The Port of St. Bernard is
100 percent recovered. Cruise line activity is expanding.
- The Lake Charles MSA is the only area directly hit by Rita
(although the storm did cause parts of New Orleans to
- With the exception of lower Cameron Parish (the most sparsely
populated parish in the state), Lake Charles experienced
virtually no floodwater damage. This MSA is performing like
most regions that suffer from a major natural disaster -- the
construction sector has led a rather quick rebound from the
effects of the storm. There were 47,384 homes damaged by Rita
in this MSA. Of that total, 2,284 incurred severe damage, and
6,673 experienced major damage.
- After a decline of 6,100 jobs (6.7 percent) in October 2005,
the area regained all of those jobs, plus some, within two
months. Initially the MSA was setting employment records, but
its year-over-year numbers have declined since May. In its
August release, the Department of Labor estimated that
employment was down in the Lake Charles area by 2,200 jobs
since August 2005. Manufacturing employment was down by 1,400
jobs, or 15.4 percent. It was during this time that the
Lyondell Chemical Plant closed. Plus, the aircraft repair firm
EADS reduced its work force from about 350 down to 160 before
selling to Aeroframe Services. Leisure and hospitality sector
employment fell by 2,400 jobs or 17 percent over this time
period mainly because of the loss of the two Harrah's
riverboat casinos. Manufacturing employment in the MSA is down
post-storm primarily because of a decline of 1,200 jobs in the
chemical industry -- about one-fourth of that attributable to
Lyondell Chemical, which employed 280 people when it closed.
- Housing remained largely intact in Lake Charles, alleviating
the issue of living quarters for workers.
- Employment in the construction sector leapt right after the
storms. By March, employment in this sector had risen by 3,600
jobs after reaching its low point in October 2005. As of
August, this sector is still leading all others in the MSA in
terms of growth, up 2,300 jobs, or 22.8 percent, from the 2005
- The construction sector should be a key player in this
region's growth. Lake Charles homeowners will receive a
sizable chunk of the Road Home money when those checks are
distributed later this year. Private insurance monies all will
be spent on home and commercial establishments. The thrust in
construction spending started in 2006 should continue well
- Officials at Chennault Airpark will spend $40 million during
the next two years to repair damage to hangars at the
airfield. Delta Downs will spend about $12 million to repair
hurricane damage. Plans have been announced for five
significant industrial projects in this area.
- Hospitals in the Lake Charles MSA suffered varying degrees of
damage, but, with the exception of South Cameron Memorial, all
were reopened shortly after the storm.
- The Lake Charles Regional Airport now is operating a full
commercial schedule. All commercial flights are arriving and
departing from a temporary passenger terminal located near the
original terminal. The new terminal will comprise
approximately 65,000 square feet, compared to the present
terminal with 44,000 square feet.
- Pinnacle Entertainment, which owns L'Auberge du Lac casino,
has purchased both of Harrah's gaming licenses in Lake
Charles. The company will use one to construct a new
$350-million casino resort near L'Auberge du Lac called
Sugarcane Bay Resort, which is scheduled to open in 2009.
Sugarcane Bay will employ 1,500 to 1,600 workers. Pinnacle is
required by the Justice Department to move the other license
out of the Lake Charles market.
- By Oct. 31, 2005, all public schools in both Calcasieu and
Cameron parishes were open.
- For the most part, the hotel industry in Lake Charles has
recovered well from the aftermath of Rita, according to Scott,
although he cited continued staffing problems. The MSA had
4,100 of the original 4,685 rooms open as of August. Two
bright spots on the horizon are that L'Auberge du Lac will
spend another $45 million next year to add a 250-room tower to
its hotel complex, supporting 500 new permanent jobs, and
Pinnacle's proposed Sugarcane Bay Resort will include another
- Sales tax collections in the Lake Charles MSA reflect the
relatively large amount of money spent on home and business
repairs and the replacement of vehicles damaged by the storm.
Initially, between August and September of 2005, local sales
taxes fell by a whopping $8.7 million, or 63 percent. Sales
tax collections soared from only $5.1 million in September
2005 to $18.4 million the next month. In August 2006 -- though
collection growth had retreated slightly -- tax receipts were
still 13.6 percent higher than August 2005.
- The Port of Lake Charles escaped flooding by Rita. However, it
did experience about $40 million in wind damage and initially
had no power. Almost all repairs are now complete, and the
port is expecting to spend more than $100 million on capital
improvement projects over the next five years. Tonnage has not
returned to pre-Rita levels. In fact, tonnage in August 2006
was about 166,500 tons lower than a year earlier, a decline of
19.6 percent. Breakbulk and bulk commodities like rice and
lumber are actually up compared to last year. In March, the
port loaded the largest volume of bagged goods in its 80-year
history when one million bags of rice were loaded for shipment
to the Philippines.
Pascagoula, Miss., MSA
- The Biloxi-Gulfport MSA is composed of three counties. Hancock
and Harrison counties are located on the coast; Stone County,
north and inland of them. Almost 60 percent of the homes in
Mississippi that were destroyed were in this MSA. Most were in
the two coastal counties, where water surges from the Gulf
claimed many houses and businesses.
- Officials in Mississippi already have designed, received
federal approval for, and implemented their federal housing
assistance program and are issuing checks to homeowners.
- Since bottoming out in January, employment has more or less
crept upward, rising by an average of only 370 jobs per month
in the first seven months of 2006. However, that pace picked
up in August with a much-faster 2,000-job addition. This
improvement can be traced to the reopening of some large
casinos on the coast. Pre-Katrina, this MSA was home to 13
casinos with a large hotel/restaurant support industry around
it. The casino sector is still down 11,000 jobs
year-over-year, but it was down by nearly 16,000 jobs at one
- Employment in the natural resources and construction sector is
up by 6.6 percent. The natural resources part of this sector
is quite small, so the job gains are most certainly
concentrated in the construction sector -- not a surprising
discovery given the volume of repair work under way in the
- Northrop Grumman's work force of 200 is fully back in Gulfport
and may get a boost as a result of a new $2.5-billion contract
with the Navy to build two additional amphibious assault
ships. The area received good news when Edison Chouest
Shipyards announced it is seriously considering opening a new
shipyard along the Industrial Seaway in Gulfport. To be called
GulfShip, this would involve an $18 million capital investment
with a startup work force of 200 and ultimately as much as
- The housing market is hot in the Biloxi-Gulfport MSA. After
declining by 72 percent in the first three months after
Katrina, housing permit activity has jumped dramatically,
rising from only 46 permits in November to 488 in June. One
reason for the high level of permitting activity is the sheer
number of homes destroyed or damaged by the hurricane. The
Reviving the Renaissance group is working on plans for a
4,200-unit development near Woolmarket that would be a mix of
houses and apartments in the $120,000 price range, along with
some retail development. It is estimated the complex would
take about three years to build. Also, Congress has
appropriated $314 million to build 1,067 homes at Keesler Air
Force Base, the largest single appropriation of its kind in
Air Force history.
- By Nov. 15, all seven hospitals in this MSA were operating at
- Before Katrina, 11 casinos operated in the Biloxi-Gulfport
MSA, and Hard Rock Casino was set to open along with the
Silver Slipper. All of these remained closed until late
December 2005, when the Imperial Palace reopened, followed by
the Isle of Capri and the Palace Casino Resort. In August
2006, re-openings started to accelerate, so that by September
2006 eight of the casinos in this MSA were back in operation.
New legislation allows shore-based gambling rather than river
boat gambling. Eight additional new casinos have announced
plans to enter the market.
- The Gulfport-Biloxi Regional Airport is making excellent
strides toward returning to pre-Katrina activity levels, Scott
reported. After declining by nearly 72 percent in the month
after Katrina, enplanements are now only one percent below
- All of the public schools in this MSA are open. However,
enrollment is 23.2 percent below pre-Katrina levels.
- This MSA had nearly 15,000 hotels rooms before Katrina. By the
end of 2005, only 4,044 were opened. That number now has
almost doubled to 7,698 as more casinos have opened along with
- Employment in the leisure/hospitality sector initially
declined from 30,500 in August 2005 to 23,400 in October 2005.
Then another round of layoffs occurred when many of the
casinos and restaurants, which had been carrying employees on
the payroll, even though they were not working, finally
released these workers, according to Scott. This led to a
decline of 14,700 jobs from the August 2005 employment peak.
Employment rose by only 360 per month in the first six months
of 2006. However, employment has increased by a much faster
1,050 per month over the July-August period as more casinos
- After dropping markedly in September 2005, tonnage moving
through the Port of Gulfport rebounded to the 30-40 percent
level within two months. As of August 2006, import tonnage is
still 41 percent below pre-Katrina levels, and export volume
is 18 percent lower.
- One of the few strongly positive economic measurements in this
MSA is sales tax collection. In August 2006, total MSA sales
taxes were up 47.5 percent year-over-year, and in Harrison
County collections were up more than 50 percent during that
same period. Collections were smaller and recovered at slower
rates in the other two counties in this MSA. In Stone County,
collections were 29.8 percent higher year-over-year; in
Hancock County, there are enough near-term building projects
on the books in the New Orleans area to represent a 28-year
construction cycle in normal times. Up 28 percent.
Oil and Gas Production in the Gulf of Mexico
- The Pascagoula MSA is composed of Jackson and George counties
and is the smallest of the four MSAs covered in this report.
Even post-storm New Orleans is nearly eight times larger than
Pascagoula; Biloxi-Gulfport, about 60 percent larger; and Lake
Charles, nearly 69 percent larger. Like Lake Charles,
employment recovery has been rapid in Pascagoula, attributable
largely to construction jobs, according to Scott.
- As of August 2006, the area had recovered all of the jobs lost
post-Katrina and is even with August 2005. Job recovery is
being largely driven largely by construction employment, as
insurance monies and federal rebuilding assistance funds are
pumped into the region. Pascagoula actually is doing better
than Lake Charles in the trade, transportation and utilities
sector, where Pascagoula is already showing job gains, and
Lake Charles continues to show a small job loss of 200. Large
employer Ingalls Shipyard has managed to get its employment
back to about 12,000, a decline of more than 1,000 from
pre-Katrina levels and a drop that largely explains the
1,400-job deficit that still exists in this sector as of
August. The firm is very much in the hiring mode, but employee
housing remains a persistent problem, with workers still
living in temporary quarters at the shipyard or nearby.
- In 2006, construction employment has stabilized at a new level
of 2,800 jobs, about 300 jobs higher than a year earlier. Even
though insurance settlements and government grant monies are
flowing into the MSA, construction employment has hardly
varied from this new 2,800-person plateau.
- Housing permit activity in this MSA has been far more volatile
post-Katrina than pre-Katrina. Only one permit was issued in
the MSA in the month following the storm. With the exception
of the November 2005, March 2005 and May 2005, permit activity
has varied little from the previous year. The difference
between July 2005 and July 2006 was only three permits. Nearly
50,000 homes were negatively impacted by the storm. Rebuilding
that kind of destruction should boost permit activity
considerably in the future.
- All three of the hospitals in this MSA were operating by Sept.
5, although initially they were just seeing patients in the
- The hotel sector in the Pascagoula MSA is well on its way to
full recovery from the effects of Katrina. This is a much
smaller hotel market than the nearby Biloxi-Gulfport MSA,
where there were 14,880 rooms pre-Katrina. This MSA's hotel
industry provided 2,654 rooms pre-Katrina. As of September,
91.2 percent of those rooms are back on the market.
- All of the public schools in George County reopened Sept. 14,
2006, and all Jackson County public schools reopened Oct. 3.
- All repairs to port facilities in both harbors are complete,
with the exception of the freezer at Terminal A. An expansion
at the port which will double its capacity is in progress.
Completion of the freezer should bring this port up to 100
percent. Vessel traffic is already back to pre-Katrina levels.
- Sales tax collection data for August indicate a decline, but
collections were still nearly $3.2 million, or 29.2 percent,
higher than in August 2005. Detailed data by county reveal
that August collections in Jackson County were up 42.9 percent
and, in George County, were up 24.7 percent compared to August
Hurricanes Katrina and Rita cut a swath through the heart of the
Gulf of Mexico offshore oil and natural gas production activity.
Katrina swept over about 1,300 offshore platforms, and Rita covered
Impact of Katrina and Rita on the Banking Sector
- In the case of Katrina, 95.2 percent of the crude oil and 88
percent of the natural gas production was shut-in by August
30. By September 9, the shut-in rates had dropped to about
56-58 percent for oil and about 33-37 percent for natural gas.
- When Rita appeared, because it made landfall further to the
west and more into the center of the Gulf of Mexico production
region, 100 percent of crude and 80 percent of natural gas was
- The latest, and last, Minerals Management Service report on
shut-in data in the Gulf show that as of June 6, 2006, 12
percent of the oil and 9.3 percent of natural gas production
The FDIC has collected key statistics on banks in the affected
areas. These data are reported by the banks through the second quarter
CONTACT: Capital One Financial Corporation, McLean
- It is obvious that the impacts of Katrina and Rita were far
harsher on banks in Louisiana than those in Mississippi,
although banks in both states were dealt a substantial blow.
In the final quarter of 2005, the return on assets (ROA) for
Louisiana banks plummeted to only 0.21. The ROA for
Mississippi banks fell as well but bottomed out at 0.90 in
- In some parishes/counties there was minimal to no damage as a
result of hurricanes Katrina and Rita. For mortgages secured
in this zone as of March 1, 2006, unless a servicer had
determined that extended forbearance was appropriate for a
particular mortgage, normal foreclosure and property
protection activities were to be resumed.
- In parishes/counties that sustained moderate damage, mortgage
lenders were to continue to obtain Freddie Mac approval for
the initiation and resumption of foreclosure proceedings and
any lender-initiated property preservation work.
- In parishes/counties that sustained significant damage,
Freddie Mac extended the suspension period for foreclosure
proceedings through the end of May 2006 and required that,
once the suspension period expired, servicers were to obtain
Freddie Mac approval before initiating or resuming foreclosure
on a mortgage.
- Freddie Mac has added two other dimensions to this minimum,
moderate and significant three-zone protocol. First,
pre-payment penalties were waived in all situations for
mortgages secured in these zones. Secondly, regardless of zone
designation, servicers were to perform individual assessments
to determine if forbearance in the form of suspension of
payment or reduction in payment was warranted. Servicers could
ask for up to 12 months of relief where warranted.
- One unusual impact of the storms has been the impact on core
deposit growth rates at banks in the hardest-hit areas. Core
deposits are total deposits less time deposits over $100,000
or more. The rapid rise in this key financial variable
reflects primarily the receipt of insurance proceeds for
damaged homes and businesses, plus emergency relief funds.
Growth has been greater in the Mississippi market than in
Louisiana, perhaps because (1) homeowner insurance claims have
been settled faster there, (2) Road Home monies have been
distributed in Mississippi and not in Louisiana.
- The large increase in core deposits indicates that banks in
the region were blessed with a high degree of liquidity.
Normally, that liquidity can be put to work in high-yield
loans, which contribute to banks' bottom line. After dropping
in 2005, loan growth has returned to pre-storm levels for
Mississippi banks in the hardest-hit areas. Such a rebound has
not occurred at Louisiana banks in the strike zone. The
downward trend in loan growth has continued through 2006. The
problem for Louisiana banks in this zone is the decimated
customer base caused by the housing shortage and business
destruction, Scott said.
- Loan growth was not enough to absorb the deposit growth. That
meant banks in this region had available cash. Despite being
forced into placing much of their excess funds in
lower-earning government securities, as compared to loans, the
net interest margin did not suffer all that much. The report
explains that the great majority of the increase in core
deposits was going into low-interest or non-interest-bearing
Steven Thorpe, 504-533-2753
SOURCE: Capital One Financial Corporation