It may seem counterintuitive, but despite the tens of billions of dollars in damage caused by Hurricane Sandy, a blue-ribbon panel of economists agreed that rebuilding after the storm could actually provide a short-term boost to New Jersey’s lagging economy.
The panel, assembled by the state Treasury Department yesterday, agreed that the enormous amounts of federal disaster aid and insurance money expected to flow into New Jersey in the months ahead could jump start a state economy that has sputtered since the Great Recession of 2007 to 2009 and grew only sluggishly in the four years before that.
The economists warned, however, that New Jersey has lagged behind the nation in its post-recession recovery, and is likely to continue to do so because of noncompetitive tax rates, high costs, past failures to invest in university research and development partnerships, and an ebb in high-paying pharmaceutical and financial sector jobs.
While Treasury’s Second Annual Garden State Economic Forum was supposed to focus primarily on long-range economic trends, preliminary assessments of the impact of Hurricane Sandy overshadowed other issues, beginning with Treasurer Andrew Sidamon-Eristoff’s acknowledgement that “there will be pluses and minuses with respect to revenues” in the budget for the current fiscal year that ends June 30, 2013.
Asked about New York Governor Andrew Cuomo’s already-announced request for $30 billion in federal aid to help cover the estimated $33 billion in damage caused by Hurricane Sandy in the Empire State, Sidamon-Eristoff said New Jersey officials were still tallying the storm damage, and that Gov. Chris Christie wanted to make an accurate assessment.
“The numbers are not complete,” Sidamon-Eristoff said. “Ultimately, what matters is that our numbers reflect the very best data we have, not that we put a number out there first.”
A History of Hurricanes
Sidamon-Eristoff said it would be logical to look at what happened following Hurricane Katrina in Louisiana, Hurricane Irene last year, and other natural disasters in assessing both the budget and the economic impact of Hurricane Sandy. It is that assessment that led several top public and private sector economists to conclude that the short-term impact of Sandy over the next 12 to 18 months would be a net gain for the state’s economy.
Charles Steindel, Treasury’s chief economist, summed it up when he concluded that production and sales lost in the storm would be made up quickly, while the impact of new consumer spending for reconstruction and repairs, much of it paid for out of Federal Emergency Management Administration reimbursement and insurance settlements, would be positive once it gets underway.
“In the short term,” said Steven Cochrane, managing director of Moody’s Analytics, “this could provide a little kick-start for the economy in the labor market. Fifty thousand construction jobs have been lost in New Jersey since the recession, 10,000 in the last year. Now, we can finally put construction workers back to work, and in a state where the construction industry has been so weak, that’s good.”
Cochrane warned that it would be “absolutely essential to get the Shore up and running, and get the word out that the Shore will be open for business this summer.” Tourism ranks as New Jersey’s third-largest industry, and the Shore makes up the lion’s share of that $35 billion tourism economy.
Joseph Seneca, university professor of economics at Rutgers University, expressed optimism that the beaches and boardwalks of the shore resorts in southern Monmouth County and on Ocean County’s barrier islands could be rebuilt in time to salvage much of the summer tourism season.
“It’s a long way to Memorial Day,” Seneca said, but he noted that much of New Jersey’s summer rental housing stock is made up not of beach hotels like other states, but small privately owned bungalows that rent by the week or the room, and it is hard to know whether they will be up for the season.
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