Inflation from Katrina
The economic effects of Hurricane Katrina are still showing up. As the total displacement from the storm becomes understood, with 68,000 unemployment claims so far which will likely be absorbed by the inviting states of the refugees, the aggregate unemployment effect on the economy should be minor. A recent article in The Wall Street Journal highlights the current economic condition resulting from Katrina’s inflation after math. The real effects to inflation will be coming from the increasing energy costs that were taking effect before the storm hit, and which now are becoming realized with inflation hitting 3.6% from a year ago, which I think will touch the brakes of an already slowing economy and will pause the Feds rising of the short-term federal-funds rate. As we transition in to the winter months, we will likely see even more price increases in energy, bringing manufacturing and the economy to a slight slow down and possibly bringing inflation to the mid four percentile. On a more human note, hopefully this disaster has made it clear how important it is to hedge our selves against a local micro economic shut down, and good luck to the people that stay and rebuild.