Storm means short-term economic pain but no lasting damage
The Oct. 29 snowstorm and its aftermath will do more damage to Connecticut’s economy than any short-term boost it offered to tree-trimmers, restaurants, and merchants selling chainsaws and batteries.
But several Connecticut economists also said that while the burdens this storm has placed on the economy could reach into the tens of millions of dollars, over the long-term the impact is relatively minor.
Where its ramifications could be felt, though, are over the next seven weeks as holiday shoppers tighten their spending habits to offset storm-related bills.
“When you analyze this storm, the words that come to mind are ‘inconvenience’ and ‘lost productivity,'” said Donald Klepper-Smith, chief economist and director of research for DataCore Partners in New Haven. “I think it has siphoned off some discretionary income and it has the potential to lead some people to cut back on their spending.”
For some consumers, the storm meant purchasing a new flashlight and some extra batteries, dining out a few extra times, or possibly staying a few days in a motel or hotel as more than 880,000 residences and businesses lost power at the peak of outages.
For others, though, it meant thousands of dollars in tree-removal costs, or even several days of lost income as many companies shut down during the days of peak power outages.
Past recoveries from recession generally took off when real disposable income–earnings after taxes–had grown by at least 4 percent, said Klepper-Smith, who chaired the governor’s council of economic advisors under former Gov. M. Jodi Rell. But since what has come to be called The Great Recession ended in Connecticut in January 2010, real disposable income has climbed just 1 percent. And that means consumers weren’t too confident even before the storm drained their wallets, Klepper-Smith said.
“There are not a lot of extra dollars lying around,” he added. “In this economy, every dollar counts.”
“These things don’t appear to have left a permanent mark on the economy, but there will be after-effects,” said economist Steven P. Lanza, executive editor of The Connecticut Economy, the University of Connecticut’s quarterly journal. “Those people who were knocked on their heels will look to balance things out and they might spend a little less on the Christmas season.”
But Lanza also predicted that even for most of those households whose wallets were hit heaviest by the storm, their spending habits won’t change over the long haul. “There’s only so many peanut-butter-and-jelly sandwiches you can make instead of going to a restaurant,” he said, predicting that those households that faced big expenses would reduce their savings, tighten their belts for a few weeks, then resume normal consumption levels.
“In the long term,” he added, “this (storm) really won’t matter too much.”
Similarly, those businesses not involved in meals, lodging or chainsaw sales likely took a hit either from physical damage or lost productivity, said Peter Gioia, chief economist for the Connecticut Business and Industry Association. The latter could involve shutting down an entire business for a few days, dealing with poor worker attendance tied to outages, or both. That means goods aren’t produced or shipped and services aren’t offered.
“A lot of businesses shut down at least for a little while and in then you’ve lost economic activity,” Gioia said, adding that this translates both into reduced earnings for the company as well as for employees in many cases.
But Gioia said that while businesses remain cautious about adding new jobs, that caution stems from factors far more significant that storm-damage and a week-and-a-half of power outages.
“It seems like an eternity if you’re waiting for power, but in business that’s not an eternity,” he said. “When it comes to adding jobs, businesses are still looking to see if they are sustainable.”
Lanza echoed Gioia’s assessment that the storm wouldn’t substantially change Connecticut’s job outlook.
“The decision about adding a job, that’s a serious and important commitment,” Lanza said, adding that businesses projecting payroll and health insurance costs are more focused on national and state policy debates. “I think most businesses recognize the temporary nature of this storm.”
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