Hurricane Katrina will reduce employment by 400,000 people in coming months while trimming economic growth by as much as a full percentage point in the second half of this year, according to a Congressional Budget Office assessment obtained by The Associated Press.
The CBO report said that Katrina's impact was likely to be "significant but not overwhelming" to the overall U.S. economy, especially if energy production along the Gulf Coast returns to pre-hurricane levels quickly.
The CBO report said that it expected economic growth in the second half of the year would be reduced by between 0.5 percentage point and 1 percentage point. It put total job losses at around 400,000.
CBO, the nonpartisan agency that provides economic and budget advice to Congress, said before Katrina struck the expectations were that the U.S. economy would grow at an annual rate of between 3 percent and 4 percent in the second half of the year with employment growing by 150,000 to 200,000 workers per month.
Already, federal cost estimates for relief and recovery efforts are running as high as $150 billion (Ђ120.5 billion), adding another broader economic impact, a worsening deficit picture.
The CBO report said that the economy of Louisiana was about 1.2 percent of the U.S. economy and Mississippi was about 0.7 percent of the national economy. If half of that output were lost for three months, September through November, then it would lower total GDP for the country at an annualized rate of about 1.3 percentage points in the third quarter and 2.7 percentage points in the final three months of the year.
The report said the main areas expected to experience "prolonged and substantial disruption of economic activity" are the New Orleans-Metairie-Kenner metropolitan area of Louisiana and the Gulfport-Biloxi and Pascagoula area of Mississippi.