NEW ORLEANS — Bill Vogel predicted the third year after Hurricane Katrina would be the toughest for his French Quarter gallery. He just didn't think it would be this bad — tough enough for him to consider getting out.

It's not just the pace of recovery and higher costs of doing business that worry Vogel and other small-business owners in the Quarter; they've been coping with that since 2005. It's the national economic uncertainty dampening the industry they rely on — tourism, one of New Orleans' top sectors.

"One more year," Vogel said as a couple admired — but did not buy — several paintings in the cozy shop he's run for a decade, Gallery of Light. "If it doesn't turn, I will think about moving on."

He wouldn't leave New Orleans, he says, but isn't afraid to try different work.

More than 95 percent of U.S. businesses have fewer than 100 employees, so the well-being of small businesses is of increasing concern for state and local leaders as the economic turmoil hits Main Street.

In New Orleans, which has yet to realize significant new economic development since Hurricane Katrina hit in August 2005, small and locally owned businesses are especially important to the local economy — as they are in many struggling areas across the country. And officials worry the downturn — and the drop in consumer spending it's already causing — will be especially hard on the touristy Quarter and the city's neighborhoods that have been slow to recover from Katrina.

The Louisiana Recovery Authority has disbursed about $31.2 million in grants and loans to local businesses to help them recover from Katrina and is to release more in a few weeks. But the awards of up to $20,000 don't stretch far in the face of higher utility, insurance and labor costs, said Mark Wilson, president of the French Quarter Business Association.

"Innovation is going to have to be the mantra: Look at your business, look at efficiencies and evaluate whether you're providing what the customer wants," he said, referring to the current concerns piled on top of post-Katrina realities. "No longer will you be able to rely on volume."

A statewide economic forecast from Louisiana State University this month predicted billions of dollars in construction related to rebuilding from Katrina could help shield Louisiana somewhat from swings in the national economy. But the forecast left a question mark for New Orleans tourism, an industry locals say is worth $5 billion a year and depends on consumers and corporations around the country.

A number of conventions are booked next summer and officials hope thousands of tourists will attend an upcoming art expo. But boosters who have spent three years battling the perception of their city as violent and unable to handle major events — an image countered by the city pulling off a number of high-profile events — may not be able to compete still harder.

"That will be a challenge, to not only get our share but more of the rest of what's out there," said Janet Speyrer, a University of New Orleans economist.

New Orleans' convention and visitors bureau has increased its marketing staff, it plans a good show for participants in a January convention of trip planners, and it's urging locals to do business locally — eat out more and enjoy the offers of free wine or appetizers that some restaurants make to fill tables in slow periods.

Not all small businesses in the Quarter are struggling. Some national tour operators still see the city, with its port and cruise terminals, as a good buy. And some locals who have changed their marketing and focus are thriving.

After their home was destroyed by Katrina, Brandy and Tom Whisnant put all their attention into rebuilding their French Quarter jewelry store, targeting more local and regional shoppers, selling online and easing their reliance on tourists.

Brandy Whisnant said the business has grown every year since Katrina, though the couple is still rebuilding their house.

This year opened with great promise. College football bowl games, the NBA All-Star game, and the playoff run of the city's Hornets basketball franchise attracted huge crowds on top of such perennial tourist favorites as Mardi Gras and a jazz festival. Sales and hospitality tax receipts were up, visitation was on pace to top last year and the city got positive press for hosting big events without a hitch.

Then, just as thousands of people were heading to New Orleans for the gay pride event Southern Decadence on Labor Day weekend, the city was evacuated in advance of Hurricane Gustav. When Ike steered a course for the Gulf Coast two weeks later, it spooked people and led to a poor month for many shop owners.

"September, there wasn't a person in the city the whole month," gallery owner Rick Sutton says, exaggerating the quietude during what's typically the start of the busiest tourist season.

Before Katrina, Sutton's family employed 16 or 17 workers in four shops. Now, they have about eight employees.

Across the street from Jack Sutton Co., where Rick Sutton sells art for $200 to $10,000 almost exclusively to tourists, another of the stores his family owns is about to close.

"March through May, there was more traffic, and we were hoping it would start again in September," he said. "But with the market fluctuating the way it is, people aren't spending. They aren't allowing themselves the luxury."