As Hurricane Sandy's human costs have become clearer, the financial losses after the storm seem similarly staggering.
On Tuesday, one estimate from IHS Global Insight put total costs at somewhere between $30 billion and $50 billion, including $20 billion in infrastructure damages. Hurricane Irene, which struck the Northeast in August of 2011, cost about $13 billion in economic damages, according to data compiled by Moody’s Analytics.
As high as the numbers seem, economists say the overall impact on the economy will be minor -- some costs from the hurricane will be paid by insurers, and others will be offset with rebuilding and recovery efforts.
“The rebuilding will kick into high gear pretty quickly. It’s already begun,” Mark Zandi, chief economist at Moody’s Analytics told The Huffington Post. “A few weeks down the road, I don’t think we’ll see big economic consequences.”
The bill for Monday's storm is huge and growing: About 8 million Americans are without power, the New York City subway system has been shut down and has experienced flooding, and more than 14,000 flights have been canceled. Car sales and retail sales are likely to take a hit, Zandi said. Gas prices may even rise, according to IHS Global Insight.
But economists say that since insurance and government aid will cover much of the rebuilding, the national economy is unlikely to take a hit in the medium-term. Government aid and insurance typically have amounted to more than half of the economic costs of major disasters, according to data from Moody’s Analytics.
The hurricane also is unlikely to have much of an effect on the federal budget deficit. Government aid after Hurricane Irene totaled just $1.7 billion, according to Moody's Analytics. The deficit, in contrast, is $1.1 trillion. Gregory Daco, senior principal economist at IHS Global Insight, said that political wrangling over the cost of government aid is unlikely, considering that many politicians have dialed back their campaigns in the storm's wake.
Daco said he estimates that the hurricane will slightly hurt employment and will take a 0.5 percent cut out of real gross domestic product (GDP) in the last three months of the year. But Paul Ashworth, chief U.S. economist at Capital Economics, said that the hurricane's net impact could even boost GDP because of rebuilding efforts.
Justin Wolfers, an economics professor at the University of Michigan, noted that these statistics do not capture the hurricane's full impact. "Economic statistics in response to a hurricane bear little relation to well-being," he said. "GDP may go up a little, it may go down a little, but frankly I don't care. What I care about is that well-being is down because there was destruction, anxiety, fear, and worry."
Zandi said that workers who are unable to work now will be able to make up for it with overtime work later. He noted that most infrastructure that keeps the economy going, including cell towers, refineries and airports, is still intact, and that power outages are likely to be remedied soon. “We’re already getting back to work,” he said.
Most of Hurricane Sandy's economic impact will come from property damage, not lost work, Zandi said. Insurance companies can handle the losses, he added, since they are “well reserved and well prepared,” and their payouts still are likely to be below expectations for the year.
Ashworth noted that property repairs and infrastructure clean-up will help make up for any economic losses, since people will be getting paid to do the repairs. He added that many workers stuck at home are still getting paid and may be working remotely, and that workers are likely to get back to work in the next few days.
“It’s almost as if a lot of activity on the East Coast simply isn’t taking place ... but I don’t think there will be a lasting impact on the economy,” Ashworth said.
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