More Americans than forecast submitted claims for unemployment insurance and factory production declined in the northeastern U.S. after superstorm Sandy struck the region.
Applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, the most since April 2011, the Labor Department said today (Nov. 15). Indexes of manufacturing in the New York and Philadelphia areas showed contractions this month.
The reports add to evidence of the economic toll taken by Sandy, which killed more than 100 people in the U.S., disrupted rail and subway service, left more than 8 million homes and businesses without power for days and caused insured losses estimated at $20 billion. Many of those who lost their jobs were unable to immediately file claims because of the disruption caused by the storm, swelling the numbers last week.
“People were thrown out of work because of the storm, which is exactly what happened after Katrina,” which struck the Gulf Coast in 2005, said Jeffrey Herzog, a senior economist at Oxford Economics Ltd. in New York, who projected claims would climb to 410,000. “The infrastructure was hit in such a way that it will damage transportation and port links, which will take a long time to come back online.”
Another report today from the U.S. Labor Department showed the consumer price index rose 0.1% in October, the smallest gain in three months. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2%.
The prior week’s reading was revised up to 361,000 from an originally reported 355,000. A less-volatile measure of claims, the four-week moving average, rose to 383,750 from 372,000, today’s report showed.
Sandy struck the Northeast region, including New York and New Jersey, as it came ashore Oct. 29, and those who lost their jobs because the storm shuttered businesses may keep filing claims in coming weeks. Today’s report showed a loss of electricity prevented New York offices from taking claims two weeks ago.
“You have a double whammy this week, where people were filing claims they were unable to previously and individuals unable to work for the storm were filing additional claims,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York.
The extent of the damage means it may take weeks for the underlying trend in firings to again become clear. Before the storm, the labor market was gaining momentum even as year-end domestic fiscal policy uncertainties raised concern among businesses.
Sandy posed an additional challenge to manufacturers already affected by the recession in Europe, which has limited export orders, and concerns about the so-called fiscal cliff of $607 billion of spending cuts and tax increases set to take effect in January unless Congress acts.
“Capital expenditures look to be slowing in earnest,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York. “In addition to the fiscal cliff and uncertainty, we’ve had a synchronous slowing in global manufacturing that’s affecting us here at home.”
The Federal Reserve Bank of New York’s general economic index was minus 5.2 this month after minus 6.2 in October. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.
The Philadelphia Fed’s economic index, which covers eastern Pennsylvania, southern New Jersey and Delaware, decreased to minus 10.7 in November from 5.7 a month earlier. Economists forecast the gauge would decline to 2, according to the median projection in a Bloomberg survey.
Sandy will cut 0.15 percentage point from growth in the fourth quarter of this year, according to the median forecast in a Bloomberg survey of economists conducted Oct. 30-31. In the first quarter of next year, it will add 0.1 point to growth as damaged property is rebuilt. The economy expanded at a 2% annual pace in the third quarter.
The storm may bolster homebuilders and other housing repair companies. Sandy’s damage could spur a sales boost similar to the one provided by Hurricane Irene, which added about $360 million in sales last year, executives at Home Depot Inc. said on a Nov. 13 earnings call.
“The property damage, as we understand it, related to Irene was about $16 billion; the property damage for Sandy is about $20 billion, so it would suggest possibly higher sales, but it’s impossible for us to know right now,” said Carol Tome, the Atlanta-based company’s chief financial officer.