Sunday, December 14, 2008

The Economy Slipping on the Ice

Friday’s ice storm caused the worst power outage in New Hampshire’s history and problems in at least 6 surrounding states. When more than a million buildings are without power for more than a day, it’s enough of an event to cause a blip in the national economic statistics. Down: electricity, motor fuel, heating, work, shopping, television, deliveries. Up: utility poles, wire, windows, salt, cellular phone usage — small things by comparison.

The storm affected more than 1 percent of the U.S. population and will slow many people down for more than one tenth of the month of December, so it is probably enough to take 0.1 percent out of the already low GDP, payroll, retail, and consumer spending numbers for the month. It seems like a tiny change, but it’s almost enough to negate a normal month of economic growth.

It’s not just statistics — the reduction in economic activity from an unusual event such as this month’s ice storm, the earlier California fires, or even the Olympics TV coverage in August, does tend to have recessionary effect on the economy. It takes away a little of the economy’s momentum, as if the economy slipped for a moment on the ice. Usually these blips are small enough to even out before anyone notices. In a month like this, though, with the economy already losing momentum, events like Friday’s northeast ice storm add to the economic slowdown.