WASHINGTON: Tropical Storm Harvey will come with major economic consequences for an area critical to US energy production that will be painful, costly and lasting, but the damage is unlikely to reverberate across the country, economists said. Harvey has been downgraded from hurricane status, but it’s drawing forecasts for unprecedented flooding across the heart of an oil-producing region and in Houston, the fourth-largest US city.
The disaster that’s still unfolding across the Gulf Coast of Texas will be crushing for the region’s economy, destroying property, possibly pushing up joblessness and driving down wages, just as New Orleans experienced after Hurricane Katrina in 2005. Because such catastrophes are regionally contained and even help growth by spurring rebuilding, they come with difficult-to-predict wider effects for a country with a US$19 trillion economy. “If past is prologue, I would be very comfortable at this point saying that the devastation is significant, but it is localized,” said Mark Olson, a former Federal Reserve governor who in 2005 dissented against an interest-rate hike because he wanted to see if Katrina’s damage dragged down the national economy. “I don’t think there will be a significant dislocation or disruption beyond the state of Texas.”
