By Martin Crutsinger
The Associated Press
Washington – The number of people out of work because of Hurricane Katrina has reached 279,000, and many more job losses are expected because of Hurricane Rita.
The lost jobs, coupled with surging energy prices, are expected to deliver a sharp blow to overall economic growth in the second half of this year. Another possibility is that any further unexpected spikes in energy prices could prolong the economic weakness.
The Commerce Department reported Thursday that the economy was growing at a solid 3.3 percent annual rate in the April-June period, but that rate is sure to be weaker in the just-concluding July-September quarter.
“The problem is the combined effects of the disruptions from Katrina and Rita, plus the ripple effects in the economy from higher energy prices,” said Nariman Behravesh, chief economist at Global Insight, a consulting firm in Lexington, Mass.
Before the hurricanes sent oil prices briefly above $70 per barrel and gasoline up to $3 per gallon, analysts had forecast that economic growth in the third quarter would show an annual rate perhaps as high as 4.5 percent.
Behravesh said he now thinks growth in the gross domestic product would be closer to 3 percent in the third quarter and around 2.8 percent in the fourth quarter.
The GDP measures the value of all goods and services produced within the United States and is the best barometer of economic fitness.
It will not just be overall growth and jobs that will be hurt. Corporate profits will take a hit as companies cope with higher fuel bills.
Behravesh and other analysts are forecasting a rebound next year as the rebuilding gets started.
