What Hurricane Sandy means for the economy
The devastation of Hurricane Sandy is likely to create big distortions —
though not lasting effects — in a wide range of U.S. economic measures.
If past major storms and forecasts by economists are a guide, look for
industrial production to have taken a dip in October as factories from the
Carolinas to New England suspended activity and for housing starts to slow as
builders postpone new construction. Retail sales may take a hit but are likely
to benefit in November and December, when people buy the supplies they need to
rebuild. There could be downward pressure on November employment should some of
the employers affected (Atlantic City casinos, for example) be unable to get
back to full speed quickly.
The Labor
Department’s report on October jobs numbers
scheduled for Friday, the last U.S. unemployment report before the election,
should be unaffected
by the storm because it is based on surveys taken earlier in the month.
Economic activity will slow some in the next couple of weeks because many
businesses across the Northeast are shut down. Some will take days to reopen. During the next couple
of quarters, there will be an almost perverse boost in overall economic activity, as efforts
to clear damage and rebuild houses and businesses add to the gross domestic
product.
So far, there are no reliable estimates of the financial damage wrought by
the storm, but one pre-storm estimate of $88 billion would imply that
rebuilding efforts would add about two-tenths of a percentage point to GDP
growth. Although economists generally use GDP as a rough proxy for the overall
change in human welfare, this is an area where it fails miserably.
The storm depleted some of the nation’s “capital stock” — houses, stores,
and bridges and other infrastructure were destroyed. The country is, in effect,
poorer by whatever amount the damage comes to. But the urgent need to rebuild
will create jobs and spur economic activity, with the bill paid by insurers and
governments.
When Hurricane Katrina struck New Orleans and the Gulf Coast in 2005, the
devastation’s effect on national economic indicators was significant but
short-lived. At the time, the U.S. economy was adding nearly 200,000 jobs a
month, but that number fell to 66,000 in September 2005 and 80,000 in October
2005. The figure rebounded that November: 334,000 positions were added. (A look
at state jobs numbers confirms that the yo-yo effect was driven by employment
changes in Louisiana and other hurricane-affected gulf states).
But the economic repercussions from Katrina — in which nearly 2,000 people
lost their lives and thousands were left homeless — were fairly unique to those
circumstances and can’t easily be used as a precedent for measuring the impact
of Sandy. The physical damage to New Orleans and other Gulf Coast areas
forced thousands of residents to relocate. Katrina also disrupted oil drilling
and refining at a key transport node, causing a spike in gasoline prices nationally.
As of Tuesday morning, no major damage had been reported at oil production
or refining operations in the areas affected by Sandy. There were reports,
however, that many refineries had suspended activity to gird for the storm, so
gasoline prices on futures markets rose Monday by nearly 6 cents a gallon for
November delivery.
“The supply of petroleum products is being disrupted,” Jason Schenker of
Prestige Economics said in a report, “as Mid-Atlantic refiners are running
reduced runs, and imports into New York Harbor and other areas are disrupted.”
But rising fuel costs should be short-lived, assuming that refineries can
return to normal quickly, as people get back on the roads, airlines resume
flights and factories start producing again. Indeed, Schenker argued that due
to less demand, the storm would put slight downward pressure on crude oil
prices.
One of the reasons it’s so hard right now to predict the economic impact of
this major storm is that much of the devastation is without precedent. As of
Tuesday morning, trying to determine when the New York subway, airports and
tunnels into Manhattan might re-open was a guessing game at best. It’s too soon
to know how the economy would react if transport to, from and within the
nation’s largest metropolitan area — and its financial hub -- were disrupted
for a prolonged period of time.
If there’s a silver lining to be found in past experiences, it’s that
sometimes the need to rebuild — to replace older buildings and infrastructure —
creates longer-term benefits for communities.
In a 2002 paper published in the journal Economic Inquiry, Mark Skidmore
and Hideki Toya analyzed areas that were affected by natural disasters around
the world. They found that such events can provide the impetus needed to invest
in new and more productive capital.
Think of the intuition this way: Utilities may have resisted investing in
underground power lines because of the expense. But after this hurricane, they
may be more inclined to bury those lines, significantly reducing power outages
during future storms.
That’s one of many economic ripples likely to emerge from the devastation,
though it’s perhaps small solace to those who have lost their home to Sandy’s
floods.
Irwin, Neil.
"What Hurricane Sandy Means for the Economy." Washington Post.
The Washington Post, 30 Oct. 2012. Web. 26 Nov. 2012.
<http://www.washingtonpost.com/business/economy/what-hurricane-sandy-means-for-the-economy/2012/10/30/e6ef95ea-2293-11e2-8448-81b1ce7d6978_story.html>.
Noor Banihashem
Ahmad November 2012
Current Events
#2 Earth
Science
I read an article about the impact
of economy that Hurricane Sandy could potentially have. The article mainly
discussed the short-term impacts of our economy, and the author mentioned that
everything would probably be running normally within a couple of weeks. The
article mentioned that many business across the Northeast are going to be shut
down for a couple of weeks after the storm. Industrial production probably will
suffer a bit because they have stopped activity temporarily. Housing economy
might also start to slow down a bit because of construction workers delaying
new construction. Whatever the damage comes to, the country will be poorer
because of it. The news is not all bad though, considering that fact the
Hurricane Katrina was so much worse. Katrina disrupted oil drilling and
refining which made the price of gas to go up. Hurricane Sandy made it difficult
for the state of New York to get gas, but it never disrupted the drilling. The price
of gas went up 6 cents, but it should go down. Also, because of all the
rebuilding that needs to be done; jobs are created. This is an economic
advantage. To replace and rebuild can infrastructure can be a benefit for
communities in the long run.
This article is very important to
our lives for many different reasons. Because of the dramatic and devastation
earthquake, the whole country must suffer. Because of this earthquake, so many
people lost their home. Many factories and businesses must shut down for weeks,
days, or months. Even though this may not seem like a long time, time is money.
If these businesses miss out on a couple of weeks, this could be a huge dip in
their profit. Although this hurricane caused many economic sufferings, the news
is not all bad. Because of all the rebuilding efforts, it is estimated that
two-tenths of a percent will be added to the GDP (Growth domestic product).
Also, the rebuilding efforts are good for a community’s infrastructure. It
should help them out in the long run. The urgent need to rebuild will create
jobs, and this is also a good thing for the job economy. This hurricane affects
human life because of the affects it has on a person. This can mean a variety
of different things for a human being. A person could have lost their home, or
business and this is truly devastating. The price of gas rose 6 cents. Although
is this only for a short amount of time, that is still a lot more money per
gallon. Another person’s job could be jeopardized because of the need to shut
down for a period of time. Hurricane Sandy has made a huge impact on the
economy.
This article was very well written.
It gave great explanations of the way the economy would be affected buy
Hurricane Sandy. It explained each thing very well and in very nice detail.
Another thing that was very well done was the simplicity of the article. I was
able to understand what the article was saying pretty easily. I thought the
author did a great job at communicating the pros and cons of the Hurricane. The
article explained both the good things and the bad things that Hurricane Sandy
brought about, and I thought that because of this, it was a lot better. If the
author had just put in the cons, I don’t think everyone would have seen a clear
picture of what is really going on in the economy post Sandy. The author could
have improved the article in some ways as well. In my opinion, the author only
decided to focus on the short-term affects on the economy, but he didn’t really
focus on the long run as much. He mentioned that rebuilding of communities
would be good in the long run, but other than that, he did not mention much
about the long run affects. I feel as though if he did this, the article would
be even better. All this author must do it give specifics on how the hurricane
would be an advantage or disadvantage in the long run.
