More than 200,000 people have lost their jobs because of Hurricane Katrina, and more bad economic news is on the horizon as Hurricane Rita...
WASHINGTON — More than 200,000 people have lost their jobs because of Hurricane Katrina, and more bad economic news is on the horizon as Hurricane Rita heads for the Texas Gulf Coast and the country’s biggest collection of oil refineries.
Even a glancing blow could send energy prices higher than their record peak right after Katrina. And if Rita’s damage to Texas refineries is severe enough, economists say, gasoline could top $5 per gallon.
“Some 20 percent of the nation’s refining capacity seems to be right in Rita’s path. If that gets disrupted at all, then gasoline, jet fuel, natural gas and home heating oil will surge higher,” said Mark Zandi, chief economist at Economy.com.
Rita is expected to make landfall early tomorrow. Its arrival comes as the economic toll is still being tallied from Katrina, which came ashore Aug. 29 and devastated New Orleans and parts of Mississippi and Alabama.
The Labor Department yesterday increased the total number of job losses attributed to Katrina to 214,000, with 103,000 coming in just the last week.
Some private economists believe as many as a half-million people were thrown out of work by Katrina and they are forecasting that the nation’s unemployment rate, which had fallen to a four-year low of 4.9 percent in August, will climb when the September report is released Oct. 7.
Economic growth could be slashed by as much as a full percentage point in the second half of this year, but a rebound is expected in early 2006 as rebuilding begins.
However, that scenario could be thrown in doubt if Rita’s damage comes anywhere near the magnitude of destruction caused by Katrina, especially to the country’s oil refineries.
The economy of Houston is five times the size of the New Orleans economy, and Texas has 26 refineries that account for more than one-fourth of the nation’s refining capacity, greater than Louisiana. With four major refineries accounting for 5 percent of national capacity still shut down in Louisiana, analysts said there is no margin for error.
“There is just no spare refining capacity around to deal with these losses,” said David Wyss, chief economist at Economy.com. “We don’t have any cushion.”
Wyss said gasoline prices, which jumped above $3 per gallon after Katrina hit, could top $5 per gallon if the damage from Rita is serious enough.
That would mean consumers will spend even more filling up their tanks and will have less money to spend on other items, a serious threat given that consumer spending accounts for two-thirds of total economic output.
One thing analysts are monitoring closely is whether job losses are spreading outside of the hurricane-devastated areas. In one disturbing development, Delta Air Lines announced yesterday it will cut up to 9,000 jobs or 17 percent of its work force as it tries to emerge from bankruptcy as a leaner company.
Overall jobless claims totaled 432,000 last week, the highest level in two years.