New Orleans business: Most improved in 2011
By: Russ Britt | The Wall Street Journal's MarketWatch | 12/13/2011
LOS ANGELES (MarketWatch) — What a difference a disaster makes.
Six years removed from the near-apocalypse that was Hurricane Katrina, New Orleans thinks it has picked itself up and dusted itself off. And now the city that got a lot of sympathy after most of it was deluged has rebuilt itself and gotten a new, pro-growth attitude.
It’s showing up in the numbers. The Big Easy’s unemployment rate beats the national average, personal income growth is high, growth in economic output is above average and the city is beginning to attract businesses.
“It’s not an evolution. There’s been a cultural sea change,” said Michael Hecht, chief executive of Greater New Orleans Inc., a business promotion group. “I think New Orleans is in the midst of one of the greatest urban turnarounds.”
As a result, New Orleans moved up 44 positions in the ranks of MarketWatch’s Best Cities for Business for 2011. The city that, for two years running, was the worst city on the list is now in the top third of the class.
New Orleans moved from 77th place in the 2010 study to 33rd this year, getting 895 points.
In 2009, New Orleans was in the bottom 10. And during the first two years of the MarketWatch study, it was dead last.
Changes in the study
A number of things have worked in the city’s favor. For one, the first two years of the study examined only those cities with a population of 1 million or more, or 50 metro areas. The list was expanded in 2009 to include areas with a population of 500,000 or more, which doubled the size of those metro areas scrutinized.
Last year, the survey added data on economic output from tourism and military activities, since a number of metro areas rely heavily on either or both for their economy. New Orleans’s tourism economic output now stands at No. 3 in the nation, behind only Las Vegas and Miami.
And the devastation caused by Katrina has left the city with some favorable comparisons to the past. Understandably, the area ranked last in population growth; the population of New Orleans proper is now at about 80% of pre-Katrina levels.
New Orleans came in first place for long-term personal-income growth. Still, its short-term income growth was in the upper fourth of the 102 cities studied.
Further, the city is making strides in other areas. It ranked 15th in economic output for 2010. And its jobless rate, which stood at 6.9% for September, makes New Orleans tied for No. 16.
In past years, New Orleans hasn’t been considered a hotbed for big business. It still isn’t, ranking in the middle of the pack in revenue from S&P 500 and Fortune 500 companies. But it’s moving up the charts in small-cap Russell 2000 firms and Census figures show the city continues to add small businesses and smaller divisions of large companies at a rapid clip.
“Before Katrina, the business community arguably abdicated business and quality of life issues to the political class,” Hecht said. New Orleans’ business community has been more active since, he said.
The low cost of living in the region has caught the eye of a number of established firms that want to set up regional offices in the region, Hecht said. He says there also is a developing “on-shoring” phenomenon, where the costs of doing business in New Orleans are now competitive with such regions as India, thus giving rise to new operations in the city.
Hecht adds that New Orleans now is 40% ahead of the national average in start-ups per capita. Large chunks of the city still need to rebuild, but New Orleans now is doing so with business in mind.
“Katrina has been a near-death experience and cleansing event,” he said.
Others on the most improved list include Indianapolis, which made similar strides to New Orleans and moved up 42 spots on the list, from 71st to 29th.
Bill Witte, economics professor at the University of Indiana, says much of that may be due to improved conditions for its manufacturing industries over the past two years, still a key to the state’s economy. He adds, however, that factory work may be starting to slow down.
Others that improved markedly from last year include Albany, N.Y., up 27 spots to 40th; Albuquerque, N.M., also climbing 27 spots to 64th, and; Austin, Texas, which jumped 23 spots to crack the top 10 at eighth place.
Two cities in upstate New York also made big strides: Syracuse hopped 21 spots to 61st place, and Rochester jumped 20 spots to 54th place.