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 in Washington. 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.”
Stocks declined as U.S. lawmakers prepared for budget talks. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,353.33 at the close in New York.
In Europe, the euro-area economy succumbed to a recession for the second time in four years as governments imposed tougher budget cuts and leaders struggled to contain the debt crisis that broke out in October 2009.
Gross domestic product in the 17-nation bloc slipped 0.1 percent in the third quarter after a 0.2 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today.
Another report today from the U.S. Labor Department showed the consumer price index rose 0.1 percent in October, the smallest gain in three months. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent.
Jobless claims were projected to rise to 375,000 from the prior week, according to the median estimate of 49 economists surveyed by Bloomberg. Estimates ranged from 340,000 to 475,000.
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.
Trucks that deliver fuel to retail stations in New Jersey are facing waits more than twice as long as normal as some regional loading terminals remain offline.
Hess Corp. (HES) resumed limited marine operations at its Bayonne terminal in New Jersey Nov. 12, the company said in a statement. Rack operations, or truck loadings, remain suspended, as the site works to return to normal operations.
The storm has also taken a toll on shopping malls and auto showrooms. Retail sales in the U.S. fell 0.3 percent in October after a 1.3 percent increase in September, a Commerce Department report showed yesterday.
Philadelphia-based food service company Aramark Corp. was also affected, L. Frederick Sutherland, executive vice president and chief financial officer, said on a Nov. 14 earnings call. “Some of those operations are still not open or still not fully operational,” he said, citing damage at a Long Island depot, disruptions at a Newark plant and power outages at sites in Cherry Hill, New Jersey and Reading, Pennsylvania.
The storm probably caused around $40 billion in damage and will subtract 0.2 percentage point from economic growth in the fourth quarter, which will be made up in the first quarter of 2013, said Herzog at Oxford Economics.
“Some people will be out of work for a short period of time, but it’s not going to alter our view on longer-term economic growth,” he said.
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 percent 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. (HD) 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.
To contact the editor responsible for this story: Christopher Wellisz at firstname.lastname@example.org