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Damage from Irene appears to be less than feared
WASHINGTON -- Damage from Irene appears to be less than feared, a bit of reassuring news for a fragile economy.
Insured damage from Irene will range between $2 billion and $3 billion and the total losses will likely be about $7 billion, according to preliminary estimates by Kinetic Analysis Corp. a consulting firm. Both figures are less than had been expected and likely mean little damage to the nation's $14 trillion economy.
"Irene left several places with black eyes, but it doesn't seem to have delivered an economic knockout," said Ryan Sweet, an economist at Moody's Analytics.
The estimates from Kinetic Analysis, based in Silver Spring, Md., suggest that Irene will have caused far less insured damage than the $6 billion the industry paid out after Hurricane Isabel struck the East Coast in 2003.
The long-term costs of Irene will grow as storm-ravaged areas deal with lost business, insurance claims, dislocated workers and transportation disruptions -- costs that will take months to fully calculate.
Still, rebuilding and repairing the damage from the storm should be enough to boost economic output in the final three months of this year and perhaps beyond, economists say, .
"This region is very highly insured, so a lot of money will start pouring in, and that should re-employ a lot of construction workers who are now out of work," said Mark Zandi, chief economist at Moody's.
Zandi said he thinks the benefits from rebuilding could extend into next year's January-March quarter.
"Billions will be spent on rebuilding and recovery," said David Kotok, chairman of Cumberland Advisors. "That will put some people back to work, at least temporarily."
For now, power outages and flooding will close some businesses, costing workers lost pay and likely boosting temporary layoffs. Transportation and shipping may also be disrupted.
Chuck Watson, Kinetic's director of research and development, said the impact on businesses was limited, in part, because the storm hit on a weekend. Even so, Watson and Sweet said small businesses on the North Carolina coast will likely lose two weekends of tourist activity, including the travel-heavy Labor Day weekend.
Millions of people have lost power from the storm, and analysts said the length of the outages and the extent of disruption to public transportation in cities like New York will help determine the economic damage.
Airlines planned to resume some flights into and out of East Coast airports today.
Crews are already restoring power in Southern states hit by the storm and are starting work in the northeast.
Irene slammed into a region that is key to the nation's economic health. The mid-Atlantic and New England are home to several major cities and account for about 16 percent of the nation's economic output, Sweet said. The region also has about 14 percent of the country's workforce.
That led many analysts to worry about the potential impact of a major hurricane. The economy is struggling. Any major shock could tip it back into recession. The economy expanded at a meager 0.7 percent annual rate in the first six months of the year.
Watson said his firm initially feared Irene would be much more powerful when it made landfall in North Carolina and would remain strong by the time it pummeled New York City. That could have caused damage of as much as $30 billion, he said.
But by Friday it was apparent the storm had weakened and would cause much less damage.