New Orleans lays off 3,000 staff

The elimination of 3,000 jobs, which Nagin described as "pretty permanent," is expected to save the hard-hit city $5 million to $8 million a month. New Orleans now pays about $20 million a month in salaries for city workers, Nagin said.

He said the city was not considering bankruptcy, at least for now. "We can limp along for another month or two," he told a news conference. "Beyond two months we'll be talking again." With virtually all businesses closed the city's tax revenues have dried up.

Eighty percent of the low-lying city was flooded after the storm surge from Hurricane Katrina broke through levees and flood walls at the end of August. Hurricane Rita, which struck the Louisiana-Texas border on September 24, caused new flooding that still persists in some areas.

Many smaller communities were also devastated as the storms struck Mississippi, Lousiana and Texas. Katrina, which caused over $34 billion in insured property damage alone, killed nearly 1,200 people and was the most expensive hurricane ever to hit the United States.