Sandy Delivers Heavy Blow To US Economy
The U.S. economy grew at a moderate 2.7 percent annual rate from July through September, the government said Thursday. Weaker growth is predicted for the October-December quarter.
Sandy shut down businesses from North Carolina to Maine and cut off power to 8 million homes in 10 states. Many people could not go to work and weren't paid for weeks.
Applications for unemployment benefits rose to an 18-month high in the first week of November, driven by a surge in applications in New York, New Jersey, Pennsylvania and Connecticut.
Such applications have fallen sharply since. But the increase earlier this month will likely depress job growth for November. Many economists predict that net job growth for November will range between 25,000 and 75,000 â¿¿ well below the 171,000 jobs added in October.A Federal Reserve survey released Wednesday said economic activity in October and early November slowed from the previous six-week period in three of its banking districts covering territory from Philadelphia to Maine. That contrasted with the Fed's nine other banking districts, which all reported improvement in growth. "The storm caused bottlenecks in the production process," said Joel Prakken, senior economist at Macroeconomic Advisers. "If you don't have electric power and transportation, you can't do a lot of things." The lingering damage from the storm is weighing on the economy at a time of great uncertainty caused by the approaching "fiscal cliff." That's the name for automatic tax increases and spending cuts that will take effect without a federal budget agreement. Most economists predict economic growth will slow to an annual rate below 2 percent in the October-December quarter. And some say the rate will likely be closer to a meager 1 percent. Prakken said the storm could end up lowering the growth rate by a half percentage point. But by next year, Prakken said cleanup and rebuilding will start to add to U.S. economic growth.
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