May 4 2007 5:35AM | Permalink | Email this | Comments (2) |
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Construction spending has been growing at a brisk pace in New Orleans for more than a year but the prolonged boom many expected still seems very unlikely.

The high ground in New Orleans shows no evidence of the wrath of hurricane Katrina and is fully back in business. But it does not appear as busy as before the hurricane. The low ground still shows the destruction and despair from the flooding when the levees breached.

On a recent trip to New Orleans, Bourbon Street was raucous and busy late in the evening but well known restaurants were not full. Only a third of the halls in the convention center were being used. Street cars passed by often completely empty. I got a great rate on a boutique hotel adjacent to the French Quarter and two nights for the price of one.

What I saw confirmed our first take on hurricane reconstruction. Enterprises tied to New Orleans were quickly restored although a little work still remains to be done. This includes the offshore energy, petrochemical, port and tourist industries. A large share of businesses serving national markets from New Orleans did not need to stay and quickly left, taking good jobs with them and leaving empty or abandoned buildings behind.

Businesses serving the local market committed to rebuilding but lots of work remains to be done; some will never be done. Owners and lenders are nervous that the eventual size of the New Orleans market will not be big enough to support the pre-hurricane scale of facilities.

Finally, much of the relatively large share of New Orleans residents who depended on public assistance are unable to rebuild, or rent a rebuilt home, without a large check from taxpayers. They have not returned to the city. The cost of this rebuilding is beyond the capacity of the state of Louisiana. Congress is only belatedly supplying a portion of the needed funds, together with the usual bureaucratic maze before checks are written. Recovery will take five years or more in this part of the economy and is unlikely to include half of what was destroyed.

The prevailing local attitude is that the city deserves a handout from property insurance companies and federal taxpayers to rebuilt New Orleans as it was. That is not the kind of attitude that generates speculative construction projects. The handouts will be small and come very slowly. This attitude was obvious in a local TV news program which led with four stories about the difficulties being encountered extracting money from Congress and insurance companies. Despair was the common denominator in these reports. T-shirts for sales in the French Quarter blame the flood and the slow recovery on FEMA, President Bush, corporate fat cats, the Corps of Engineers — anyone but themselves. If you have walked along Bourbon Street you know why I can not reprint any of T-shirt editorials.