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Published:August 26th, 2011 14:00 EST
Can Hurricane Irene Damage Our Already Frail Economy?

Can Hurricane Irene Damage Our Already Frail Economy?

By Donna Cavanagh

At present, the economy grew just 1.3 percent in the second quarter up from 0.4 percent in the first quarter. Even though we are out of a recession and into a recovery, our economic health is still fragile. If Hurricane Irene takes a direct hit at New York City as some weather models predict, could the storm damage our struggling economy?

 

According to Reuters` Jame Pethokoukis, the concern for a dip back into a recession is legitimate.  A hurricane is dangerous in any area, but if it lands in the financial capital of the world, the damage might be felt for months to come.  Along with having to deal with the horror of lost lives,  the property damage would be enormous and the loss of power and communications would would cut off New York from the rest of the world including other financial markets.  The isolation could be exacerbated if flooding and extended power outages make it unsafe for workers to return to work. . 

AIR Worldwide, a firm that works with insurance companies to figure out all scenarios of a disaster has estimated that a direct hit on New York City from a hurricane could cause upwards of $100 billion.

Some believe that out of tragedy, good would emerge -- meaning that if Irene did hit New York directly, the money spent to repair and restore the financial district would spur on the economy. However, according to Art Carden of Forbes Magazine, no hurricane is ever good for an economy. While money does get spent after a natural disaster, it is money that is going to replace lost wealth. For example if a business owner has to pay to repair a broken pipe, it is money spent on services, but before the disaster that money might have been spent on expanding a business idea and growing the economy. Spending money to replace lost wealth does not positively impact the economy.

http://blogs.reuters.com/james-pethokoukis/2011/08/25/will-hurricane-irene-be-a-black-swan-for-the-u-s-economy/

http://www.forbes.com/sites/artcarden/2011/08/25/the-earthquake-wasnt-good-for-the-economy-hurricane-irene-wont-be-either/

 



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