By the Editors November 5, 2012
Although the true economic impact of Hurricane Sandy cannot be known for years to come, there is a tradition in journalism of trying to handicap such things. Even before the storm made landfall, economists were pumping out projections for regional damage and national impact, and business journalists were quoting them liberally. Is this so wrong?
There is certainly journalistic merit in reporting forecasts and estimates for damage caused by natural disasters. A number like a dollar amount can contextualize a storm that might feel outsized because of the immediacy and palpability of its damage.
The key to getting this kind of coverage right is to be thorough and honest with the reader. Don’t imbue a number with more validity than it deserves by failing to offer caveats about such estimates. And, as with most projections, do your best to avoid relying on a single source.
Here are a few ways for business journalists to key in on when sizing up the economic impact of a natural disaster. Each can be applied on a regional, national or global scale.
Cost of Damages
There are two basic kinds of losses to consider in any natural disaster: insured and uninsured. Catastrophe modeling firms, such as Eqecat and AIR Worldwide, and economic forecasters, such as IHS Global Insight, will typically publish their estimates for such losses as press releases.
If estimates vary wildly, vet them. Ask economists whether one forecaster might be particularly strong or weak in covering certain disasters or regions of the world, and when appropriate, share that information with the reader.
Note that estimates change. For example, Eqecat released pre-landfall and post-landfall versions of its forecast for damages from Hurricane Sandy. The pre-landfall release projected insured losses of $5 to $10 billion. The post-landfall release projected that damage at closer to $10 to $20 billion and added an estimate for total losses ($30 to $50 billion).
The New York Times and The Wall Street Journal used these figures to lead their main stories on the damages.
Sector Checkup
Another way to make sense of the economic impact of a disaster is to ask how it affected particular industries. How many flights did the airlines have to ground after the storm? How much business did grocery stores do before it? How many flashlights and batteries did Home Depot sell? How long were fuel stations in Brooklyn out of gas?
A sector-by-sector approach can be more helpful than a broad estimate. Customers or clients may be wondering about the availability of goods and services. Suppliers may be looking for a sense of the effect on demand. Investors could be looking to ballpark their losses.
Most news organizations will assign a reporter to a particular sector, assuming it’s not covered by a beat already. Some may also choose to publish a sector roundup, as the AP did during Hurricane Sandy.
Impact on GDP
Although any disaster’s most compelling stories center around its immediate and regional costs, it would be shortsighted to focus coverage solely on such damages without projecting the disaster’s broader impact on the economy over time. Because the gross domestic product is our best proxy for economic health, some economists will project a disaster’s impact on quarterly GDP growth.
For example, an article published by The Huffington Post on Hurricane Sandy cited GDP commentary from three economists: one who said GDP would dip in the short term, another who said it rise in the long term and yet another who said it was silly to talk about GDP at a time like this. The Wall Street Journal’s Real Time Economics blog also talked to three economists for a post on Sandy and GDP and published a variety of interesting predictions, but no numerical estimates. The Washington Post did something similar.
In US News & World Report’s coverage of the hurricane, its Economic Intelligence blog cited a separate post from Jim Hamilton’s Econobrowser that puts hurricanes and GDP growth in some perspective. According to Hamilton, hurricanes tend to take a bite out of GDP early. After that, the rebuilding effort brings an inevitable boom that brings the economy back to where it was before the disaster, but how long that recovery takes is a function of the repairs themselves.
This entry was posted on Monday, November 5th, 2012 at 8:34 am. It is filed under Skills and Tradecraft and tagged with disaster, economic growth, economy, gdp, hurricane, hurricane sandy, nyt, retail, WSJ. You can follow any responses to this entry through the RSS 2.0 feed.
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