Sandy wallops the economy

Hurricane Sandy is expected to take a $20 billion bite out of the U.S. economy.

The massive storm has put much of New York City in darkness, closed Wall Street and prevented use of the New York subway system for as much as a week, making it extremely difficult, if not impossible, for thousands to get to work in the nation’s largest city.

ADVERTISEMENT
The storm also brought economic activity to a screeching halt for two days in other major cities along the East Coast, including Philadelphia and Washington, D.C.

Still, experts say that nationally, any negative economic effects from the storm are unlikely to be felt until after Election Day, meaning the economics of Sandy might not be a game-changer for President Obama or Mitt Romney.

“Hurricane Sandy has been very disruptive as millions have lost power and many businesses and financial markets have closed, but its economic impacts should prove temporary,” said Mark Zandi, chief economist at Moody’s Analytics. “It appears that major infrastructure like sea and airports, trains, refineries and cell towers have not been significantly impacted.”

Zandi pointed out that economic activity in the region spanning between D.C. and New York City amounts to about $2.5 trillion per year. That means that when the area hunkered down for two days to wait out the storm, the economy likely lost $20 billion in activity.

Eqecat, a firm that analyzes the impact of national disasters, reached the same figure. The economic loss exceeds that of Hurricane Irene, which hit the region last year, but the firm added that only $10 billion of that loss is uninsured.

But any hit to the nation’s economy by the storm will not show up in the data until well after voters visit the polls. And even then, it’s possible the data might not fully capture the extent of the damage.

Daniel Alpert, managing partner at Westwood Capital, said that the destruction of property, a substantial economic cost in the storm’s wake, will not be captured in future economic data.

“You can knock down a bridge, but that doesn’t show up as a negative to GDP,” he said.

However, he also noted that economic harm inflicted by Sandy will also be partially offset by money spent in public and private rebuilding efforts.

“What you’re going to see is an enormous amount of government spending right now, which could not be a bad thing,” he said.

Zandi warned that the storm will create “substantial volatility” in upcoming economic data, with various areas being hurt or helped by the storm and the recovery effort. For example, he said that grocery stores likely got a boost from the storm, while restaurants would suffer.

While the 2012 presidential campaign has had a laser-like focus on the economy, it does not appear that Sandy’s arrival late in the game will present an “October surprise” on that major issue.

Brian Gardner of Keefe, Bruyette and Woods said he expects the hurricane to have “virtually zero” impact on voters’ thinking on the economy.

“I think voters have made up their minds, generally, about the state of the economy, even the undecided voters,” he said. “I really think it’s baked in at this point.”

Early on in the storm, there were indications it could throw key economic pieces off kilter.

Friday’s release of the last employment report before the election had been in some doubt because of the storm, but the Bureau of Labor Statistics (BLS) released a separate report on time Tuesday, and most people expect Friday’s report to be on time.

On Monday morning, BLS said it had not yet determined if it would be able to get out the hotly anticipated report on time. Later in the day, officials updated their stance, saying they had every intention of releasing the report Friday and were hard at work getting it done.

A key problem facing BLS employees — the need to process the data in a highly secure onsite location — abated once the storm passed, as the federal government was set to reopen its doors on Wednesday after two days of closure.

“The data is collected earlier in the month. Metro will obviously be open tomorrow,” said Gardner. “I would be very, very surprised if they didn’t get it in on time.”

The storm forced the New York Stock Exchange to shutter its doors for two straight days — the first time a weather-related event had done that since 1888. However, the exchange made it through the storm largely unscathed, and officials announced the trading floor would be humming again on Wednesday.

“We are pleased to be able to return to normal trading tomorrow. Our building and systems were not damaged and our people have been working diligently to ensure that we have a smooth opening tomorrow,” said NYSE Euronext CEO Duncan Niederauer on Tuesday.

Aware of the threat the storm posed to the world’s financial center, Treasury Secretary Timothy Geithner briefed the president Tuesday on how the storm might affect financial markets.

The Treasury has been in regular contact with market officials, regulators and banks to monitor financial conditions and infrastructure in Sandy’s wake, and Geithner planned to convene a conference call with other regulators on the Financial Stability Oversight Council, according to a Treasury official.


—Vicki Needham contributed to this report.