MELISSA BLOCK, host:
Hurricane Katrina's effects on the economy will be significant but not overwhelming; that assessment came today from the Congressional Budget Office. It predicts that the storm could reduce economic growth by as much as 1 percentage point in the second half of the year. NPR's Scott Horsley has the story.
SCOTT HORSLEY reporting:
Katrina is expected to do more damage to the economy than past hurricanes, such as Andrew or Hugo. That's because the physical damage is greater, the flooding of New Orleans will take longer to clean up and because the area hit by the storm is a critical port and energy hub. Already Katrina has displaced hundreds of thousands of people from Louisiana and Mississippi. Chief economist Nariman Behravesh of Global Insight says the nation's payrolls will suffer a significant drop.
Mr. NARIMAN BEHRAVESH (Chief Economist, Global Insight): Many hundred thousand jobs will be lost, some of them temporarily, some of them for a longer period of time. Many of these people actually still have jobs. They'll be moved probably somewhere else, but they have jobs. It's really those people who are in the tourism industry, those people who work for small businesses that may have a tough time getting their jobs back.
HORSLEY: Some of the displaced workers are already looking for temporary jobs elsewhere. The Manpower temporary office in Houston has a lot of warehouse openings that pay 8 to $12 an hour. Manpower's Serena Jettalina(ph) says she's hearing from a lot of Louisiana transplants.
Ms. SERENA JETTALINA (Manpower): Mostly they just want to work. They'll do anything. I mean, we have people calling in who are mechanical designers who were like, `I will clean floors.' We're just trying to help anybody in that situation.
HORSLEY: The Congressional Budget Office expects employment to rebound gradually as workers are able to return home and businesses reopen. While reconstruction may be slower than after past hurricanes, Behravesh says eventually the Gulf Coast will see a building boom.
Mr. BEHRAVESH: Certainly it will give a big boost to construction employment in that part of the country; there's no debate about that. It will probably also put some upward pressure on building materials' prices. So it will be good for the construction industry overall.
HORSLEY: The hurricane has already caused a huge jump in gasoline prices. That leaves consumers with less money to spend on other goods, although the Congressional Budget Office says the effect should be temporary.
The storm has also snarled shipping traffic on the Mississippi River, which was already hampered by low water levels in the north. Wells Fargo economist Michael Swanson, who's based near the river's northern end in Minneapolis, says while port repairs are well under way in Louisiana, making up for lost time could be difficult.
Dr. MICHAEL SWANSON (Economist, Wells Fargo): We see that the railroads are already maximized, so if we don't get the barges to circulate their natural pace, we're going to have some real bottlenecks here during the harvest. That's going to lead to low prices for farmers.
HORSLEY: Even so, Swanson forecasts only modest economic damage from Hurricane Katrina. He notes that goods which travel by water are, by definition, bulky, heavy and cheap.
Dr. SWANSON: A suitcase full of microprocessors is worth a whole barge load of corn. But for the person that needs the steel or the nitrogen fertilizer, they're not going to be able to substitute computer chips for that. So they're kind of stuck where they're at.
HORSLEY: One saving grace is that the US economy was growing at a fairly healthy clip before the hurricane. So even though Katrina's a big shock, most economists say it's one the system can withstand. Scott Horsley, NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.