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In holiday season, Sandy repairs continue -- and add up

A man carries plywood in the heavily damaged Rockaway neighborhood.

Many Americans have the day after Thanksgiving off, free to enlist leftovers into sandwich service, or get sucked into Black Friday shopping hype. But for construction and cleanup workers in the Northeast, the scale of work needed for Hurricane Sandy rebuilding means holidays are work days. And all those swinging hammers add up to major economic impact.

With many in the storm’s path still suffering, it may seem early to talk about the repair effort boosting GDP. But the numbers are too big to ignore. The hurricane tore through expensive and well-insured real estate, so a lot of money will be spent rebuilding homes and businesses.

Bernard Baumohl, chief global economist at the forecasting firm Economic Outlook Group, predicts that rebuilding could add up to as much as $150 billion over two years. Even after accounting for losses related to the hurricane, he expects the extra activity to grow the economy by an additional half percent next year.

Mesirow Financial chief economist Diane Swonk's estimate for storm-related economic growth is a bit lower, between $50 to $100 billion. But that’s enough to have major impact, as well as some side benefits, like revitalized roads and bridges.

“Because it comes out of emergency funds, you do get improvements, net improvements to infrastructure,” Swonk says.

But there are longer-term costs. States may have to cut services or raise taxes. People may drain their savings to get by after the storm. And insurance costs will rise.

“The insurance companies are taking a loss,” Moody's Analytics housing economist Celia Chen points out. “So they will raise premiums and so forth and that definitely adds to the cost of owning property.”

That’s the kind of impact that hurts long after the extra construction jobs are gone. But if the boost is as positive as many forecasters predict, it’ll be welcome in a region that’s ready to be back on its feet.

Mark Garrison: With many in the storm’s path still suffering, it may seem early to talk about the repair effort boosting GDP. But the numbers are too big to ignore. The hurricane tore through expensive and well-insured real estate, so a lot of money will be spent rebuilding homes and businesses.

Bernard Baumohl: It’s just a broad array of areas that I think will ultimately result in about $125-150 billion over the course of two years.

Bernard Baumohl of Economic Outlook Group predicts that even after accounting for the losses from the hurricane, recovery impact will grow the economy by an extra half percent next year.

Baumohl: It’s gonna lead to more employment as well, particularly in the construction field.

Mesirow Financial chief economist Diane Swonk doesn’t think the effect will be quite as big as he does. But she does expect it to be substantial. Another benefit is local governments get new money to make damaged roads good as new.

Diane Swonk: Because it comes out of emergency funds, you do get improvements, net improvements to infrastructure.

But there are longer term costs. States may have to cut services or raise taxes. People may drain their savings to get by after the storm. Moody's Analytics housing economist Celia Chen points out another problem for homeowners.

Celia Chen: This does increase insurance costs because the insurance companies are taking a loss, so they will raise premiums and so forth and that definitely adds to the cost of owning property.

That’s the kind of impact that hurts long after the extra construction jobs are gone. But if the boost is as positive as many forecasters predict, it’ll be welcome in a region that’s ready to be back on its feet. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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