05/25/2011 08:30 am ET Updated Jul 25, 2011

Joplin Tornado Inflicts Economic Setback On Community Still Struggling With Recession's Legacy

The tornado in Joplin, Mo., has dealt severe economic damage to a community still struggling to recover from the Great Recession.

As local leaders respond to the devastation from the Sunday tornado that claimed at least 125 lives, efforts to care for the injured naturally take precedence over economic considerations. But in the coming weeks, as the community rebuilds the hospital that was damaged, the roads that were torn up and the homes and stores that were destroyed, the cost will weigh heavily on this city of 50,000, where the local economy already faced strains.

As many as 2,000 buildings in the city were destroyed by the tornado, according to estimates from local emergency management officials. And as many as 10,000 buildings were damaged, according to a Tuesday report from the Oakland, Calif.-based catastrophe risk modeling firm EQECAT. The insured loss is estimated to be between $1 billion and $3 billion, EQECAT said.

But the full economic consequences will likely be even greater, EQECAT senior vice president Tom Larsen said in an interview. With buildings destroyed, workers will go without jobs, and businesses will lose revenue. Even as insurers pay claims, residents will likely absorb personal financial losses of untold value. The cost to the region, Larsen said, will likely amount to at least an additional $1 billion, borne partially by the local government and individual residents.

"This is a major hit upon that area," Larsen said. "Some people may move out and never come back."

For a city whose general fund budget is just over $20 million, these figures seem enormous. President Barack Obama has declared a disaster in Joplin, making the city eligible for federal assistance. After the tornado struck, the House Appropriations Committee approved a $1 billion aid package, in an effort to keep federal disaster relief accounts funded through the end of September, the AP reported.

The economic fallout could be long-lasting, however, as the city continues to grapple with the recession's legacy. In 2006, before the economic crisis, the unemployment rate in Joplin was 3.8 percent, according to the city's most recent financial report. By 2010, it had jumped to 8.2 percent.

As of October, the city's third-largest employer was St. John's Hospital, with 2,480 employees, according to the financial report. Walmart was the sixth largest, with 920 employees, the report says.

Both employers have been devastated by the storm. On Sunday, the tornado tore into St. John's Regional Medical Center, leaving a path of destruction and killing five patients, according to a New York Times report. A local Walmart now lies in ruins.

The local real estate market, too, could face a major setback. The pace of building in Joplin has slowed in the years since the economic crisis. Construction during the six months that ended April 30 amounted to $13.4 million, a 36 percent decline from the same period a year earlier, the Joplin Globe reported this month, citing building permits.

For the fiscal year that ended last October 31, the value of residential and commercial construction reached $60.4 million, less than half of the construction during the fiscal year that ended in 2007, the Globe said.

Reached by phone on Monday and Tuesday, the city's accounting manager, Joel Gibson, said it was too early to estimate the financial damage from the tornado.

"Right now we're in the search and recovery phase," he said Tuesday. "I'm trying to manage phones, take care of people here."