New Orleans' mayor has told police to use persuasion or force to evacuate anyone still refusing to leave the flooded city, as health fears grow.
Ray Nagin said all but those involved in the rescue effort should leave.
Up to 10,000 may still be in the city, amid water contaminated by dead bodies, raw sewage, fuel and rusting vehicles - nine days after Hurricane Katrina hit.
Meanwhile, it has emerged that some 400,000 jobs could be lost this year because of the hurricane.
The Congressional Budget Office estimate comes as the economic impact of Katrina is put at more than $100bn (£55bn) by economists.
Earlier, US Treasury Secretary John Snow said the effect on the wider economy could be to stifle US growth by half a percentage point - although rebuilding work might actually boost the economy in 2006.
Mr Nagin issued his emergency declaration late on Tuesday, authorising police and military to remove anyone who refused to leave their homes.
Leaking fuel and other chemicals have created a thin slick floating on the floodwater.
Soldiers and police fill the city, moving about in long convoys of military lorries, Humvee jeeps and commandeered buses along streets which are unlit at night because there is no electricity. Police cars cruise by, their lights flashing silently.
One police spokesman described Mr Nagin's order to use force to evacuate people as a public relations nightmare.
"That's an absolute last resort," Capt Marlon Defillo told the Associated Press news agency.
Looting has been widely reported in New Orleans and many householders are fearful of losing their possessions if they leave.
Environmental experts have warned that the planned pumping of New Orleans' contaminated waters into the Mississippi River and Lake Pontchartrain could have damaging effects for years to come.
They say the water could kill fish and poison the surrounding wetlands.
But Mr McDaniel, secretary of the Louisiana Department of Environmental Quality, said there was no option but to pump the water straight into Lake Pontchartrain.
"It is almost unimaginable the things we are going to have to plan for and deal with," said Mike McDaniel, a Louisiana environment official.
Mr McDaniel said reconnecting residents to fresh water mains would take years, and water would have to be brought in.
In a separate development, a warning went out to residents of Florida and the Atlantic coastline as Tropical storm Ophelia approached.
The storm is not expected to affect areas devastated by Hurricane Katrina.
Presidential and Congressional plans for inquiries into how the disaster was handled have been questioned by the opposition Democrats, who have raised the idea of an independent commission.
President George W Bush said on Tuesday he would lead an investigation himself as two Senate committees began separate inquiries.
"I don't think the government should be investigating itself," said Senator Hilary Clinton.
"I don't think either the president or the Congress can conduct the kind of objective, independent investigation that we need," she said on CBS television.
Thousands of people are estimated to have been killed by Hurricane Katrina in New Orleans and the Gulf Coast, and hundreds of thousands are living in temporary shelters in Texas and other states.