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​New Orleans' economy: recovering from a "heart attack"

After Hurricane Katrina decimated New Orleans, Michael Hecht decided to relocate his family from New York City to the Southern port city, accepting a job with the Katrina Small Business Recovery program.

His colleagues in New York "thought I was slightly mad," he recalls. New Orleans was in shambles: About 1,800 residents died in the disaster; houses and businesses were destroyed; the city's famed tourism industry was wiped out.

Hecht, who now serves as CEO of the local economic development agency Greater New Orleans Inc., said he decided to make a bet on New Orleans because of a hunch.

"We saw from the experience of 9/11 that it's possible to come through tragedy and disaster and come back with something better," he said. "I always looked at New Orleans as a city with great intrinsics, but lousy management."

Now, a decade later, Hecht's instincts have been proven right, by some measures. Tourism, which is the economic lifeblood of the city, has returned to levels that are even higher than before the storm ravaged its streets and neighborhoods. New jobs and businesses have been created, providing new opportunities to residents and luring professionals from out-of-state.

Yet challenges remain, ranging from a population that's still below pre-Katrina levels to low wages and racial divides.

To be sure, some of those issues, such as the racial and socioeconomic inequities that continue to affect New Orleans, were present long before Katrina arrived. And the city faced an economic decline that started well before the seawalls gave way under the force of the storm.

"The economy of New Orleans had been stagnating for probably 35 years before Katrina," Hecht noted. "It never recovered from the oil bust of the 1980s. It underperformed not just the south but the nation by half in terms of job growth."

New Orleans, 10 years after Katrina 04:32

Jobs dwindled in shipbuilding and water transportation jobs, while government work has also been trimmed back. The peak for employment levels in the region was in 2001.

After Katrina, some people thought the damage might spell an end to a city that's known for jazz, Creole cuisine and its lively French quarter. But $135 billion was poured into the city to help rebuild its infrastructure, giving the city a chance to regain its footing.

Annual visitor spending to New Orleans is higher now than it was before Katrina, although the number of visitors is just shy of the 10 million people who booked a trip in 2004.

Flashback: CBS News coverage of Hurricane Katrina 01:23

"It's almost like if you have a friend who has an unhealthy lifestyle and has a heart attack that scares him but doesn't kill him, and now he is running a marathon," Hecht said.

While New Orleans has come a long way since the devastation of Katrina, the city continues to face major economic challenges. Seven out of 10 new jobs created between 2010 and 2014 were in low-paying industries, such as tourism and retail, according to the Brookings Institution. Job growth in higher-paying sectors, such as energy and distribution is lagging, the think tank said.

The poverty rate in New Orleans stood at 19.3 percent in 2013, or higher than in 2005 or 1999, Brookings found. In real terms, median household income is still below where it was in 1979. Still, wages in the city rose sharply after Katrina, increasing from just over $40,000 in the early 2000s to about $48,000 in 2013, according to The Data Center, a research organization based in Louisiana.

"Many white households in greater New Orleans are better off, having expanded their ranks in the middle- and upper-class since 1999, while the corresponding share for black households shrank," Amy Liu, co-director at Brookings' Metropolitan Policy Program, wrote in a research post. "These numbers are a stark reminder that the last 10 years of reforms represent only a down payment on the harder work ahead."

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