The US Economy Seems Hurricane Proof

  • Date: 01/11/12
  • James Pethokoukis, AEIdeas

Hurricanes can cause tremendous destruction and terrible fatalities. But in the U.S, with its massive and diversified economy, their impact is tough to see from the macro level.

103112hurricane

  • In the aftermath of hurricane carnage of historic scope in the highly populated U.S. mid Atlantic, a huge impact on living conditions in New York and New Jersey should be expected for at least some weeks. At the same time, history shows little discernable macroeconomic impact from hurricanes. Even hurricane Katrina is difficult to recognize in macroeconomic activity measures and the latest severe example in Sandy is unlikely to prove different.
  • Storm preparations and repair alter categories of spending, weakening discretionary activity for a time while boosting “staples.” The destruction impacts wealth and boosts output measures through reconstruction over several quarters, though even in the latest case this may be difficult to measure across macro statistics and industry-level data.
  • Labor productivity and incomes are weakened for a time and non-labor costs for business rise as transportation and other bottlenecks arise in affected areas. But unlike the earthquake in Japan, there appears to be no lasting damage to major U.S. production facilities that would severely harm U.S. output potential.

AEIdeas, 1 November 2012