Katrina effecting economy

[H2SO4]

It seems the trends of things (im 14 so i don't know all the correct terms, so ill try) prices and sales of houses and other things are starting to show signs of the next recession (in USA?). So Is katrina the last straw? Are we most likely going to fal into another recession?

[Pangloss]

It's an interesting question, given the affect 9/11 had on the economy. It's not so much the repair bill as it is the dampening affect on industry moving forward past this point. Picture all those buildings in downtown New Orleans standing empty. I believe I read somewhere that about 400,000 jobs were instantly eliminated.

 

So I think it's clear there will be some kind of effect. But it's very hard to say at this point what that affect will be. The economy is extremely strong in all the key indicators right now. The main "down sides" of it are personal in nature, such as the question over how many people are making a "living wage" and that sort of thing, which doesn't really impact the economic figures in an immediate sense.

 

The only real red light at the moment is inflation, but it's important to keep in mind that out of all the factors that affect inflation, only one of them has been on the upswing. That is, of course, the price of energy (oil). One thing that's interesting about that is that consumer goods have not increased in price as much as one might think. But there's a built-in lag there that may simply not be fully accounted for yet. Still, my hunch is that inflation is still under control.

 

The real killer will be when the wage-price spiral kicks in. Before Katrina we were approaching Clinton-era "full employment" again, the housing market is skyrocketing, and the price of energy is going up. On top of that, 1/3 of the working population entered the workforce within the last five years, and is looking to move up in the world (put another way, the current wave of house-buying is actually likely to *increase*). And with full employment, that means the employees have more say in how much they get paid (because employers can't just hire someone else).

 

Those factors could induce a massive wave of wage increases like we saw in the 1980s. And the factors that prevented its return during the Clinton era (namely the "bubble") no longer exists. So we could see a return of a downturn like the one we saw during Bush 41, which is to say a reduction to around 2% growth and a brief recession.

 

Such is the cyclical nature of the economy.

[Edisonian]

It seems the trends of things (im 14 so i don't know all the correct terms, so ill try) prices and sales of houses and other things are starting to show signs of the next recession (in USA?). So Is katrina the last straw? Are we most likely going to fal into another recession?

 

I would like to believe that there won't be a recession. However, I think there will be a ripple effect, and in about six months the economy will be hit hard. We are talking hundreds of billions of dollars worth of damage "realized."

 

>Billions in property damage

>Some insurance companies will tank or go "red"

>Millions in health claims

>Hundreds of thousands of displaced and unemployed people

>Thousands of economically distressed and depleted "helping" families and organizations

>Likelihood that the oil industry responds with higher prices down the line

>Billions needed to fix the environment in New Orleans

>Hundreds of millions (if not billions) of dollars lost from failed and bankrupt regional business

 

I think this is a lot more serious than people think.