Crain's New York - November 5, 2012 - (Page 11)

E Despite storm, NY’s economy will thrive xactly one year after the Sept. 11 terrorist attacks, the city comptroller at the time, William Thompson,issued a dire report.He put the cost of the disaster to the city at $83 billion.He said some 83,000 jobs had been lost and warned that the total economic decline could top $100 billion. To reach that conclusion, he had made an important assumption.The modest decline in the city’s economy that had occurred in the first nine months of 2001 would have ended except for the attacks. “On a single day,” Mr. Thompson claimed, “the economic picture of the city changed.” It was a ridiculous statement. Wall Street was about to jettison more than 35,000 jobs not because of the Sept. 11 tragedy but because of the Internet bust. The exaggeration of the impact of 9/11 is a guide to how to predict the economic consequences of Superstorm Sandy. Economists have extensively studied disasters such as hurricanes, and with only a few exceptions, they come to the same conclusion: The immediate economic losses are made up during the rebuilding. This sounds callous. The loss of life is tragic. Many businesses will suffer, and some small businesses in particular will be hurt. But it is easy, too easy, to focus on the plight of the losers from a disaster and ignore the many winners. As economists say, you have to look at the offsets. Let’s start with the situation in the city. Property damage has, frankly, not been that extensive. Some buildings, especially downtown, have been flooded and need to be repaired. None have been destroyed, as happened in the terrorist attacks. BREEZY POINT RESIDENTS console each other after a devastating post-storm fire destroyed more than 80 homes in the Queens neighborhood. GREG DAVID Some public infrastructure, including Con Edison facilities, has been put out of commission. Again, the problem is repair, not replacement. Homes have been lost in Queens and on Staten Island, but the total is in the hundreds, not the thousands. In all these cases,hundreds of millions, if not billions, of dollars will soon be arriving to pay these costs. Private insurers will foot most of the bill for private infrastructure, although homeowners will get money only if they signed up for federal flood insurance. The federal government will also reimburse the city, the state, the Metropolitan Transportation Authority and Con Ed for at least 85% of what they spent and probably more. That money is already flowing to suppliers and especially workers who are putting in enormous overtime—and getting paid for it. The storm caused an economic disruption that lasted for almost the entire week. Yet the city’s hotel industry provides the best example of how one business’s loss is another’s gain. As Crain’s reported last week, hotels that remained open—and that’s the overwhelming majority of them—reported 100% occupancy, even some that didn’t have hot water or electricity. Think of it this way. A Broadway show that is closing in the next few weeks will never make up the losses from Monday’s and Tuesday’s dark theaters. Other shows will do fine because theatergoers will take their refunds and buy tickets to future performances. The damage and disruption is much greater, of course, in New Jersey and on Long Island. Economists admit there are cases where hurricanes have permanently damaged relatively small geographic areas, most notably the Ninth Ward in New Orleans and the Homestead area of Miami.They also note that those two neighborhoods were poor before the storm and economically fragile. New Jersey and Long Island are among the richest places in the country.The basic economic equation will take hold again: Insurance and federal recovery money will unleash a building boom that will ripple throughout the local economy. Some numbers put all this in perspective. Moody’s Analytics put the storm losses at $50 billion, about $30 billion of it in property damage. If New York accounts for a third, then the total would be around $17 billion. That is about 1% of the New York area’s $1.3 trillion gross metropolitan product—and even that will be reduced by insurance and the offset of storm-related rebuilding and repair. The Sept. 11 comparison is the most telling. Three years after the attacks, researchers at the New York Federal Reserve Bank showed that the employment losses from the disruption were only about half what the comptroller claimed, and that they had been overcome in about a year. No job will disappear because of Sandy. The leading historian of New York had predicted that outcome in a meeting with the staff of Crain’s a few months after Sept. 11. Kenneth Jackson recounted a series of disasters that had shaken the city—the 1904 General Slocum ferry sinking, which killed 1,021 passengers; the 1911 Triangle Shirtwaist Factory fire, which cost 146 workers their lives; and the devastating 1938 hurricane known as the Long Island Express,which caused great damage in Brooklyn and Queens—and asked if any had altered New York’s future. None had. Sept. 11 didn’t fundamentally change much about the city’s economy, which recovered from the 2001-2003 recession when Wall Street did. Sandy won’t, either, which means the city’s economic recovery will continue. November 5, 2012 | Crain’s New York Business | 11 bloomberg news http://www.crainsnewyork.com/events-bestplaces2012 http://www.crainsnewyork.com/events-bestplaces2012 http://www.crainsnewyork.com/40under40 http://www.crainsnewyork.com/40under40

Table of Contents for the Digital Edition of Crain's New York - November 5, 2012

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
EDITORIAL
GREG DAVID
REAL ESTATE DEALS
REPORT: EDUCATION
CLASSIFIEDS
FOR THE RECORD
DIGITAL NEW YORK
SMALL BUSINESS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crain's New York - November 5, 2012