By Carey Gillam

KANSAS CITY, Mo., Nov 20 (Reuters) - People in a vast seismic zone in the southern and midwestern United States would face catastrophic damage if a major earthquake struck there and should ensure that builders keep that risk in mind, a government report said on Thursday.

The Federal Emergency Management Agency said if earthquakes strike in what geologists define as the New Madrid Seismic Zone, they would cause "the highest economic losses due to a natural disaster in the United States."

FEMA predicted a large earthquake would cause "widespread and catastrophic physical damage" across Alabama, Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee -- home to some 44 million people.

Tennessee is likely to be hardest hit, according to the study that sought to gauge the impact of a 7.7 magnitude earthquake in order to guide the government's response.

In Tennessee alone, it forecast hundreds of collapsed bridges, tens of thousands of severely damaged buildings and a half a million households without water.

Transportation systems and hospitals would be wrecked, and police and fire departments impaired, the study said.

The zone, named for the town of New Madrid in Missouri's southeast corner, is subject to frequent mild earthquakes.

Experts have long tried to predict the likelihood of a major quake like those that struck in 1811 and 1812. These shifted the course of the Mississippi River and rang church bells on the East Coast but caused few deaths amid a sparse population.

"People who live in these areas and the people who build in these areas certainly need to take into better account that at some time there is ... expected to be a catastrophic earthquake in that area, and they'd better be prepared for it," said FEMA spokesperson Mary Margaret Walker. (Editing by Andrew Stern and Xavier Briand)

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