Slowly Recovering
The economy shows resilience as jobs and energy trickle back
Pump prices reached record levels in the wake of Hurricane Katrina, but by last week it became clear that motorists would not see a 1970s replay. Except for a few initial scattered shortages and lines at service stations, fuel flowed in all parts of the country. Certainly, consumers were dismayed when gasoline settled at about $3 a gallon nationwide, up 18 percent over prestorm levels, but there were no panics, trucker strikes, or state attempts at rationing. The market worked, although painfully.
The stock and bond markets also weighed in with their verdicts: Katrina will depress the economy in the third and possibly fourth quarters, but a recession isn't in the offing yet. Indeed, the Dow Jones industrial average is up nearly 300 points from pre-Katrina levels.
"What people forget is that sometimes you need to have prices go up to bring demand down," says Michael Lynch, president of Strategic Energy and Economic Research of Cambridge, Mass. And initial government figures did, indeed, show consumer demand for fuel easing--ever so slightly--compared with the weeks before the hurricane, although it was still up 1.5 percent over the same time last year. In any case, pump prices held steady and crude oil futures fell from the previous week's highs, reflecting the market's view that imports and releases from the Strategic Petroleum Reserve would help the nation weather the shortfall as repairs to battered rigs and refineries proceed in the Gulf of Mexico.
Getting paid. Businesses from Alabama to Louisiana were starting to pick up the pieces, and their employees were slowly adapting to their new lives. For now, most large employers in the hardest-hit areas are providing paychecks, benefits, and donations to affected employees. Northrop Grumman, which employs about 20,000 in its shipbuilding facilities on the Gulf Coast, paid all employees for two weeks. Several thousand have already returned to work, with more likely to do so in the coming weeks. Harrah's, which has 8,000 employees at its casinos along the coast, will pay its workers for at least 90 days. Employees of the 17 Wal-Mart and Sam's Club stores that remain closed are invited to work at other stores around the country. Additionally, 10,000 people had applied for unemployment benefits; the Congressional Budget Office estimates that Katrina will result in a net loss of 400,000 jobs.
Some fortunate New Orleanians already have jobs in other cities with their employers, part of the mass population that will resettle elsewhere. Galen Hames was the maitre d' at the restaurant in the Marriott Renaissance Arts Hotel. Marriott bused its remaining employees and guests to Houston after the floodwaters rose and offered jobs elsewhere to those who wanted one. Hames, 34, is now a server at Marriott's Horseshoe Bay Resort in Texas. "In six days, I was fed, clothed, sheltered, cleaned, and given a job," Hames says. "Marriott didn't have to do that." He can stay in a suite rent free until mid-November, and he expects to remain there with the company.
Others were less fortunate, and no one is suggesting the effects of the worst natural disaster in U.S. history will be anything but long lasting. "I think it's somewhat perilous to predict the price [of gasoline] is going to go down substantially or not going to go up substantially, simply because we are in a very difficult situation, with no margin left, and we're only halfway through the hurricane season," says Robert Darbelnet, president of AAA, formerly the American Automobile Association. Last week, about 40 percent of the Gulf's oil and 60 percent of its natural gas production were back on line, and three of the eight shuttered refineries restarted. But four refineries will be out for months, and about 5 percent of U.S. refining capacity will be off line for the remainder of September. "The situation remains horrific, and light will be at the end of a very long tunnel," the securities firm Fimat told its clients.
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