Disaster May Have Cost
US Over 500,000 Jobs
Katrina Weakened Economy, Experts Say

Bloomberg News
Refugees at the Baton Rouge River Center are just a small sample of the thousands that face a jobless as well as a homeless future. Hurrican Katrina may cost 500,000 Americans their jobs this month, the biggest decline in payrolls in more than 30 years and a loss that will show up as early as next week in claims for unemployment benefits, economists said.
"There are currently more than a million displaced people, and I don't expect many of them to be back at work by the time of the September payroll survey," said Ian Shepherdson, chief economist at High Frequency Economics. Shepherdson estimated the drop in payrolls this month may reach half a million, the biggest decline since December 1974.
Because Katrina struck at the end of the month, it didn't influence August payrolls, which showed a 169,000 increase in jobs and a drop in the unemployment rate to a four-year low of 4.9%, the Labor Department said yesterday.
The ravaged Gulf Coast cities of New Orleans, Biloxi, Mississippi and Mobile, Alabama, account for about one million jobs, according to economists at Stone & McCarthy Research Associates.
The government surveys businesses for the pay period that includes the 12th of the month. A worker is considered employed if he or she worked for at least one day during that time.
"It is hard to imagine that too large a percentage of these jobs will be sustained over the next few weeks," said Ray Stone, managing director at Stone & McCarthy. "Perhaps several hundred thousand" of the workers in the region won't be able to return to their jobs soon enough to be counted as employed, he said.
Some economists still expect payrolls to increase this month. John Herrmann, director of economic commentary at Cantor Fitzgerald, said he expects the hurricane to reduce payroll growth by about 100,000 jobs for the next month or two, followed by a rebound of about 200,000 jobs as rebuilding begins.
"Near term, we look for a little bit of head winds and then we should see the economy regain traction," he said in an interview.
Katrina will have a "tremendous" impact on employment in the Gulf Coast region, Labor Secretary Elaine Chao said in an interview. "It definitely will be devastating."
Still, "we can hire people who don't have jobs now and employ them in the recovery and cleanup" efforts, Chao said, adding that she's confident all the lost jobs eventually will be restored or permanently replaced with new ones.
The effects of the storm on economic data will start becoming apparent next week with the release of the weekly unemployment claims figures, economists said.
Meanwhile, economists are slashing their forecasts for third-quarter economic growth, citing the aftermath of Hurricane Katrina.
"Hurricane Katrina had a devastating impact on the Gulf economy," Ethan Harris, Lehman Brothers' New York-based chief U.S. economist wrote in a report. Harris lowered his prediction for the current quarter's expansion to 3.8% from 4.1%.
Katrina caused property damage of as much as $35 billion in the South, making it the costliest U.S. natural disaster, according to Risk Management Solutions. The death toll was put in the thousands by officials and destroyed commerce along the Gulf Coast region, which produces a third of the nation's oil, a fifth of its natural gas and handles 40% of U.S. grain exports.
Crude oil reached $70.85 a barrel on Aug. 30, the highest since futures trading began at the New York Mercantile Exchange in 1983. It is up 3.2% this week and 55% in the past year.
Gas futures surged 21% this week. U.S. two-year Treasuries had their biggest weekly gain since 2002, pushing yields down to 3.75% from 4.07%.
Meanwhile, stocks were largely unchanged after a turbulent week. The Dow was down 12.26 to 10,447.37 while the Nasdaq was down slightly, giving up 6.83 to 2,141.07.
Stocks closed higher for the week, led by a rally in energy companies.
Bloomberg News



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