The Marketplace Report: Hurricane's Fiscal Punch
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The Commerce Department reports today that the US economy was growing strongly in the second quarter of the year, but that was before two disastrous hurricanes struck the Gulf Coast and economists are still trying to gauge the likely effects of that. "Marketplace" New York bureau chief Bob Moon joins us now.
Bob, although the economy was thriving before the hurricanes, maybe we just give up on that given the extent of the damage that's been done.
BOB MOON reporting:
Well, Alex, you could look at it this way, the way a doctor looks at a patient. If somebody suffers severe trauma, they're likely to have a better shot at recovery if they were in good physical shape to begin with. So in that sense, today's numbers are at least somewhat reassuring because they do show that the economy was humming along quite nicely before the disaster struck. In the second quarter of the year, the gross domestic product--which is pretty much the best gauge of the nation's economic fitness--it grew at a 3.3 percent annual rate, which is about what analysts had been expecting. That compares to a 3.8 percent growth rate in the first three months of this year.
Now here's where the hurricanes come in. Before Katrina and Rita, the consensus for growth in the second half of the year was above 4 percent. Well, now economists are widely anticipating a slowing to a pace of around 3 percent. And keep in mind now we're talking about the economy continuing to grow, not a nosedive here. This is growth. It's just expected to be at a slower pace than had been expected.
CHADWICK: And are there numbers that support this?
MOON: Well, in fact, just one positive sign today from the Labor Department. The number of Americans filing new claims for jobless benefits actually dropped by 79,000 last week, which was much better news than had been widely anticipated. Much of that was thanks to a big drop in the number of hurricane-related applications. They totaled 60,000 last week, and that was down from about 108,000 the week before.
There are a couple of caveats here, though, as well. As often happens, these numbers are likely to be revised at some point. And the Labor Department points out there are a lot of claims that were still being collected using, you might say, out-of-the-ordinary methods because of all the hurricane disruptions.
CHADWICK: How about a picture of how the--of the damage the storms left?
MOON: Wall Street's really looking for any and all data on that very question, and there are a lot of discouraging reports still emerging out there. The Financial Times reports that oil industry officials now believe that this latest hurricane, Rita, caused more damage to oil rigs than any other storm in history, and that it could force companies to delay drilling for oil in places even outside the Gulf because of a likely shortage of drilling equipment. And also, the big credit rating service Standard & Poor's is reporting that past-due commercial mortgage loans in the hurricane region have risen sharply, and that might not bode well, either.
Today in the "Marketplace" newsroom, we'll be taking a look into the pressure on the Red Cross to start sharing all those hurricane donations.
CHADWICK: Huh. All right. Thank you, Bob Moon of public radio's daily business show "Marketplace," produced by American Public Media.
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