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Sandy's Economic Toll Stretches Far And Wide
Originally published on Wed October 31, 2012 4:45 pm
RENEE MONTAGNE, HOST:
Preliminary estimates of the destruction that Sandy left in its wake are that economic losses could total between 30 and $50 billion.
NPR's John Ydstie reports on the economic effects of the damage to infrastructure and disruption to business caused by this huge storm.
JOHN YDSTIE, BYLINE: The region most affected by the storm extending from New York City through Philadelphia and Baltimore to Washington, D.C. has an annual economic output of about $2.5 trillion. It's one of the richest and most densely populated areas of the country, so the opportunity for disruption and damage is great. Among the most famous businesses disrupted, the financial markets on Wall Street were closed for two days. They're back in operation today.
But thousands of small businesses were also affected.
TOM HAND: Tom Hand, and we're in Fred's Tavern in Stone Harbor.
YDSTIE: That's Stone Harbor, New Jersey, which is on a barrier island just off the coast. Sunday night, there were four feet of water in the streets. Tom Hand showed NPR's Jeff Brady around his flooded business.
HAND: On this side of the bar, we've got about six inches all through, you know, got into our beer boxes, got into a lot of our kitchen equipment. Most of the damage is here. This is the lower-lying area.
YDSTIE: Tom Hand says he figures he's got at least $200,000 in damage. He thinks his flood insurance policy will cover most of that, but he doesn't have business interruption insurance, so he'll lose lots of money while he's closed down for the next couple of weeks cleaning up the mess. Mark Zandi of Moody's Analytics says right now, lots of money is being lost by businesses like Fred's Tavern.
MARK ZANDI: Well, it's certainly having the impact now, no doubt. Restaurant meals aren't getting eaten. Airplanes aren't flying. We're not seeing people in Atlantic City at the slot machines. So that's loss, and that's lost for good.
YDSTIE: Airlines cancelled close to 17,000 flights because of the hurricane, costing them tens of millions of dollars. Zandi thinks the total loss of output is likely to be close to $20 billion, but he says much of that output will be made up as businesses get back to work. For instance, packages not shipped by FedEx or UPS during the storm will be added to shipments in the coming days.
ZANDI: If some factories have been put offline because workers couldn't get to work or they're fearful of flooding, they'll probably operate more hours in the future.
YDSTIE: Of course, given the extensive damage to the New York subway system, which gets millions of workers to their jobs each day, disruption to New York businesses could be very long and costly. As for the cost of physical damage, it will take weeks to get detailed reports. But Zandi and other analysts think the total is likely to be between 15 and $20 billion. Again, he says with the help of insurance money, government aid and the personal wealth of the region, the factories, homes and bridges destroyed will mostly be rebuilt.
ZANDI: It hurts a lot right now. Certainly a lot of financial pain as we sort this all out. But then as we move into November and December, I think we got more economic activity. And by the end of the year, certainly by early next, I think the economy's roughly where it would have been otherwise.
YDSTIE: Even if insurance covers half the cost of the physical damage, as is estimated, Gregory Daco of IHS Global Insights says it's still a hit.
GREGORY DACO: Insurance is not a free lunch. It comes out of insurance profits. And so, in the end, this may lead to higher insurance premiums from insurance companies.
YDSTIE: No doubt many business people will be ruined by the storm, and some homeowners will be unable to rebuild. But both Daco and Zandi say Hurricane Sandy will not derail the overall U.S. economy. They predict that by early next year, it will have climbed out of this hole, and U.S. economic output will be about where it would have been if the storm hadn't happened.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright National Public Radio.