Jaison R. Abel and Jason Bram
The regional economy experienced a weakening in the aftermath of superstorm Sandy, according to the New York Fed’s latest Beige Book report. Eight times a year, each of the nation’s twelve Federal Reserve Banks produces a report on current economic conditions in its District, based on largely anecdotal information obtained from a variety of regional business contacts. The New York Fed’s report covers New York State, northern New Jersey, and southwestern Connecticut.
In the newest report—based on information collected through November 15—many businesses across the New York City metropolitan region reported losses in activity due to widespread disruptions from Sandy. Prior to the storm, however, the general consensus was that business conditions were holding steady. In upstate New York, which wasn’t affected directly by the storm, most contacts reported business as usual, though there were scattered signs of softening in housing, manufacturing, and vehicle sales. Some contacts upstate did note some indirect effects from the storm’s disruptions—largely to supply chains.
As to the types of businesses adversely affected by Sandy, many retail stores and hotels in Lower Manhattan and elsewhere in the metropolitan area were without power for a number of days. Even when stores were able to reopen, it was often difficult for both workers and potential customers to access them. Even in areas that didn’t lose power or sustain flooding or damage, businesses were adversely affected—for example, attendance and revenue at Broadway theaters were exceptionally low, not only in the week of the storm (when they shut down for two days) but also in the following week. The trucking industry was also disrupted, as many terminals and warehouses sustained heavy flooding.
The labor market showed marked signs of softening after the storm. However, this softening was viewed as a brief lull in hiring activity, as many firms were shut down or without key recruitment personnel. Still, it should be noted that few contacts in manufacturing or other sectors expect their firms to reduce headcount in the months ahead.
On a more positive note, there were some signs of strength in the regional economy prior to the storm. Consumer confidence climbed to its highest level in well over a year, based on two surveys of residents in the region. Housing markets in New York City and northern New Jersey were showing gradual improvement, and rebuilding efforts are expected to boost construction activity in the months ahead. Most of the housing-related concerns following the storm pertain not to slack demand but rather to excess demand: for rentals in and around New York City; for construction equipment and materials, which experienced shortages; and for property and homeowners’ insurance, which saw steeper prices. However, it remains to be seen how long it will take for the regional economy to get back on track and whether it will get an additional boost from the recovery, repair, and rebuilding phase that typically follows natural disasters like Sandy. Our next Beige Book report, to be issued in mid-January, should shed some light on these issues.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
Jaison R. Abel is a senior economist in the Research and Statistics Group of the Federal Reserve Bank of New York.
Jason Bram is a senior economist in the Research and Statistics Group.