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Economy Lab

As an economic event, Irene was just a breeze Add to ...

Hurricane Irene exacted a terrible toll on the families of the dozens killed and the thousands made homeless by flooding, while inconveniencing millions who lost power. As an economic event, however, Irene will have left the United States essentially unscathed - good news for an economy that needs no more bad news.



The nonstop coverage of what was merely a Category 1 hurricane (compared to the devastating Category 5 of 2005’s Katrina) reflected its trajectory toward the power and media capitals of the U.S., which had just experienced an earthquake the week before.



But, it must be said, a hurricane that eschews Florida for the northeastern U.S. also sets out a course that can be much more economically damaging. Economist Michelle Meyer of Bank of America/Merrill Lynch notes that the 11 U.S. states that declared states of emergency last week produce 25 per cent of the country’s GDP.



Which is why it is fortunate that Irene weakened to a tropical storm before it hit the major economic centres. At current damage estimates of $7-billion (U.S.), it will not crack the top 10 in damages from recent hurricanes, Ms. Meyer notes. (The damage estimate is from the firm Kinetic Analysis, while the list is maintained by the National Hurricane Centre.)



Ms. Meyer notes that a number of businesses in the storm’s path will remain closed for several days, and an untold number of people will be unable to report to work.



But expect nothing like the jobs impact from Katrina, which, with an estimated $105.8-billion in damages, caused jobless claims to spike by about 79,000 over several weeks, adding about 25 per cent to the total at the time, Ms. Meyer says. She expects an “upward bias” in claims due to Irene, but nothing near that magnitude.



And since the U.S. Bureau of Labour Statistics already did its surveying for its payroll report in mid-August, she expects no impact on those numbers for August.



In the aggregate, Ms. Meyer expects the short-term loss of productivity to be offset by the higher retail sales that led up to the hurricane and the government-assisted rebuilding to come after.



“As for GDP, we do not expect a discernable impact … It is hard to see a big macro impact from Hurricane Irene, but the pain on an individual level should not be overlooked.”



Damages from prior hurricanes: (in billions, 2007 dollars)



Hurricane

Category

Cost (U.S.$-billion)

Katrina (2005)

3

105.8

Andrew (1992)

5

45.6

Ike (2008)

2

27.8

Wilma (2005)

3

20.6

Ivan (2004)

3

19.8

Charley (2004)

4

15.8

Hugo (1989)

4

12.8

Rita (2005)

3

11.8



Source: National Hurricane Center

 

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