Economics Effects of Superstorm Sandy
This report examines the immediate and continuing economic effects of hurricane Sandy that struck the North Eastern Region of the United States of America, specifically New York, and New Jersey in late October of 2012. Several articles from national and regional news agencies were used to compile the facts pertaining to the economic conditions of the region as well as the implications on the national economy. Studies indicate that the economic effects of hurricane Sandy has caused loses totaling over $50 billion dollars however, there is evidence shown by some studies to be a large amount of positive economic growth and activity that has been generated from the destruction of the storm. This report will analyze the economic trends on a regional as well as national scale and then determine if the damaged caused has provided enough stimulus to out-weigh the negative economic impacts that have stemmed from this disaster.
In October of 2012, the eastern seaboard of the United States of America saw one of its most cataclysmic natural disasters in recorded history. Hurricane Sandy also known as Superstorm Sandy caused mass power outages, loss of homes as well as cities and economic destruction that is still being tallied over a year later. The nation watched, as power was lost from the Carolinas all the way to Maine and saw homes swept out from their foundations. The following essay analyzes the immediate as well as continuing economic effects both negative and positive on the North Eastern region of the United States specifically New York and New Jersey as well as the ripple effects felt through the rest of the nation’s economic environment. Storm Overview
Before the analyses of the economic impacts caused by Hurricane Sandy are to be conducted it is important to understand the severity of the storm. Understanding the timing of the storm during the calendar year plays an important role, as does the overall size of the storm in regards to the amount of destruction caused. The government website for the National Aeronautics and Space administration (NASA) gives a detailed comparison to Hurricane Katrina which caused massive destruction to New Orleans, Louisiana in August of 2005 and Hurricane Sandy. According to NASA the two storms began as tropical storms that drew their power from the warm waters of the tropics; however, at landfall Katrina continued as a “tropical cyclone” while Sandy merged with a storm front from the west and created what NASA deemed to be an “extra-tropical cyclone”. (Volland, 2013) The difference between the two is mainly a huge increase in power and width (See Appendix A). Katrina remained in the Louisiana area at landfall with concentrated high winds while; Sandy expanded rapidly covering almost twelve states at one time with winds of the same speed. By comparing these two storms, there’s no thought of one being worse than the other, but the significant difference in their size and power is noteworthy. The timing of Sandy plays a crucial role in the state of the economy because, as reported by the Federal Emergency Management Agency, the touchdown of Hurricane Sandy first appeared on Sandy on October 29, 2012 and response as well as recovery lasting until November 21, 2012. The major importance of the timing is many people being put out of work as well as losing everything they own directly before the economy is to be stimulated by the holiday shopping season. This caused a massive drop in sales from several strong companies that typically do not see such a decline this time of year. Immediate
It is important to consider the debate of the argument of whether this disaster had more positive or negative economic effects that the major economic implications of a natural disaster are in large part negative in the immediate time period following the event. The immediate analysis of the economic effects of Hurricane Sandy is stunning because of the mass amount of damaged caused which then rippled across the nation’s economy. The most prominent effect that was immediately recognized by economists when Sandy struck was the shutdown of the majority of the East Coast, which accounts for a daily GDP of about $10 billion (Khimm, 2012). Justin Wilfers , an economist at the University of Michigan, stated in an article by the Washington Post entitled “The Economic Impact of Hurricane Sandy” that “the negative economic impact is because no one is working, therefore no one is buying anything”(Khimm, 2012). Continuing on the point made by Mr. Wolfers about no one buying anything is many people had lost their employment because of the storms destruction. In an article by the Huffington Post, titled “Sandy economic damage worse than expected at $62 billion”, unemployment numbers rising to an 18 month high directly after the storm with the majority of the applications coming from the New York, New Jersey, Pennsylvania and Connecticut area (Crutsinger, 2012). A survey conducted by the Federal Reserve showed that from Philadelphia east towards Maine had showed slowed economy activity in those three districts while, the other nine districts domestically had shown improved economic activity in the three weeks following the storm (Crutsinger, 2012). There is a counter-balance trend that is occurring regarding the economic activity directly after the storm. The regional part of the United States affected by hurricane Sandy shows a large slowdown in economic growth and spending whereas the rest of the country seems to being doing normal or improving. However, there is a major gap in the recovery time from a Macroeconomic standpoint to a Microeconomic standpoint as well as recovery in different financial sectors. The banks, stock markets, and other financial institutions regained their stride rather quickly but retail, transport and delivery operations struggled due to a plethora of factors. The immediate estimate for economic loses including meals not sold or flights cancelled added up to about $20 billion and rose as the damage was still being calculated (Stone, 2012). As the fuel shortages began to come into effect companies such as FedEx were beginning to halt deliveries because there was no fuel for the trucks. Shea Leordeanu, a FedEx spokesperson, stated this in an interview during the weeks following the storm “We’re reaching out to everyone who has a gasoline tanker that we can move to these areas…There has not been an impact yet, but this is something we can see as an issue and we’re concerned” (Walsh, 2012). For a company such as FedEx that operates on a national basis delivering packages to and from the northeast region of the country this is quite a blow to their operation as a whole. The fuel shortages on Long Island undoubtedly hurt the oil companies most likely not as much as FedEx suffered but there still was an impact. There may be a counter-balance in relation to growth and spending but the immediate effects of the region caused companies that operate on a national scale to be affected by an event that happened in a regional area of the country. As a whole the events that immediately followed Hurricane Sandy, in both the regional and national environments, had a generally negative economic impact on the country. Continuing
Hurricane Sandy struck the North Eastern region of the United States just over a year ago and the economic effects continue to influence the nation till this day. The storm destroyed countless homes, cars, roads, bridges, business and other items of value that totaled the damage of the storm well over $50 billion dollars (Walsh, 2012). This damage then translates to spending by the citizens of the United States, which in turn will foster economic growth and expansion that ultimately improves upon the state of the economy before the storm struck. This however turned out not to be the case in regards to the continuing effects of Hurricane Sandy. The immediate effects such as a drop in GDP from the North Eastern region was made up within the following months and then proceeded to return to normal (Khimm, 2012). From a macroeconomic view hurricane Sandy seems to be just a small bump in the road however, from a microeconomic view there is a great deal of turmoil concerning rebuilding and returning the normal. New York and New Jersey have both suffered a great deal with countless homes lost and a major part of their tourist infrastructure being destroyed. There are several statistics outlining the damage to New York and New Jersey area and the recovery. Between both states over 651,000 housing units were destroyed, and as of this past October, less than 200,000 have been inspected by FEMA. The months following Hurricane Sandy 49.9% of projects undertaken by the federal government were safety orientated. The overall insurance claims payout between both states adds up to $3.66 billion (Visser, 2013). Ocean County of New Jersey has estimated that 26,000 residents have still not been able to return to their homes. Gigi Liaguno-Dorr owns a restaurant that requires $2 million to be rebuilt and she has only received a quarter of that money (Parry, 2013). Ms. Liaguno-Dorr’s restaurant employed a large number of the town’s residents but has been closed since Hurricane Sandy destroyed it. Millions of dollars in federal aid was spent to rebuild the Jersey Shore boardwalk and other tourist attractions. The south shore and Fire Island of Long Island saw an immense amount of damage with a large amount of homes being flooded or taken out completely from their foundations. The struggle that is continuing to have an effect on the North Eastern region is acquiring the funds to start rebuilding and returning to normal operations. From a macroeconomic perspective Hurricane Sandy was a small bump in the economy because it caused a short increase in sales of bread, water, gas and other necessary storm related items. Other than the immediate supplies needed the national economy took Hurricane Sandy in stride and continued without major economic effects on a continuing basis. On a microeconomic analysis Hurricane Sandy was a negative for the region that it had affected with very little positives. Given time there is a possibility for the suffering economies of New Jersey and New York to bounce back but as for the current lingering effects of Hurricane Sandy it proves to be more of a burden then a blessing. Personally, being from Long Island, I find it a shame that people are still without homes or the proper resources to help get them back on their feet. Fortunately, my home was not significantly damaged, but my grandfather’s was. His home is located next to a canal in the Great South Bay and the water damage caused him to not be able to live at home for seven months. A lot of the repairs to his home came from his own pocket because insurance and FEMA took too long to get to him. Although this didn’t drastically affect the nation as a whole, a large part of the United States is still suffering from this disaster and the process to turn things around has been a long one. Should these states move forward and significantly progress the aide given to people severely impacted, they might see a turn in an economic standpoint. Conclusion
The tragedy that was Hurricane Sandy left many without homes, jobs and even family members. From an economics standpoint it caused billions of dollars’ worth of damage that won’t be returned for a long period of time. On a macroeconomic scale hurricane Sandy can be viewed as a small plus in the area of increased sales for necessary hurricane items however, there were large losses in sales, food services, delivery services and various other economic sectors. These losses were eventually absorbed or are still being absorbed by those suffering from them. Macroeconomic effect from Sandy from the above report and research would be a neutral to slightly negative economic impact both long term as well as short term. The effect on the microeconomics surrounding the region of the North Eastern United States is greatly negative. There is a great deal of damage caused by the hurricane not only monetary but physically and mentally as well. The atmosphere in the destroyed areas of the region is depressed. People do not have the money to rebuild and they are not living in their homes. Businesses have either been destroyed or closed waiting for money to repair in order to reopen. There is decreased spending as well as a decrease in economic growth.
Appendix A Diagram 1- Hurricane Sandy prior to landfall. (Volland, 2013)
Appendix A Diagram 2- Hurricane Katrina prior to landfall. (Volland, 2013)
Crutsinger, M. (2012, November 29). Sandy economic damage worse than expected at $62 billion. Retrieved from http://www.huffingtonpost.com/2012/11/29/sandy-economic-impact-damage_n_2214060.html Khimm, S. (2012, October 29). The economic impact of hurricane sandy. Retrieved from http://www.washingtonpost.com/blogs/wonkblog/wp/2012/10/29/the-economic-impact-of-hurricane-sandy/ Parry, W. (2013, October 13). A year later, hurricane sand'ys effects still linger in new jersey. Retrieved from http://www.huffingtonpost.com/2013/10/13/hurricane-sandy-new-jersey_n_4093139.html Stone, C. (2012, November 02). The economic impact of hurricane sandy. Retrieved from http://www.usnews.com/opinion/blogs/economic-intelligence/2012/11/02/the-economic-impact-of-hurricane-sandy Visser , N. (2013, October 29). Hurricane sand'ys impact, by the numbers (infographic). Retrieved from http://www.huffingtonpost.com/2013/10/29/hurricane-sandy-impact-infographic_n_4171243.html Voiland, A. (2013, March 07). Hurricane sandy (atlantic ocean). Retrieved from http://www.nasa.gov/mission_pages/hurricanes/archives/2012/h2012_Sandy.html Walsh , M., & Schwartz, N. (2012, November 01). Estimate of economic losses now up to $50 billion. Retrieved from