WASHINGTON: Hurricane Harvey caused “broad disruptions” to economic activity in the US Gulf Coast region, causing gasoline shortages and spiking freight costs, the Federal Reserve said Wednesday.
However, it was still too soon to measure the full extent of the impact caused by the storm, according to the Fed’s regular survey on economic conditions.
More broadly, the US economy continued to grow at “a modest to moderate pace” in July and August, as labor markets but amid disappointing auto sales, the survey showed.
Harvey left a fifth of oil and gas production in the Gulf of Mexico offline and shuttered 15 refineries, according to the “beige book” survey, which gathers reports of economic activity from local business contacts at the 12 regional central bank outposts nationwide.
“Activity in the energy and natural resources sector was generally positive prior to shutdowns arising from Hurricane Harvey,” according to the survey.
However, “Some areas experienced gasoline shortages and supply was expected to remain tight in the southeastern United States because of pipeline disruptions,” the report said in a note on the hurricane.
And further from Texas, contacts in the Richmond area “indicated that spot freight prices jumped after the storm, as freight was being redirected around the country,” it added.
Current damage estimates for Hurricane Harvey, which made landfall in Texas on August 26, vary from around $50 billion to well in excess of $100 billion.
But analysts say it could be a year before more precise costs and losses are known and the Fed noted that it was “too soon to gauge the full extent of the impact.”
Keith Phillips, an assistant vice president at the Dallas Fed, on Tuesday said economic activity in the Gulf Coast region could grow slightly faster in the remainder of the year as reconstruction gets under way.
Research shows growth could rise as high as 1.9 percent from the current forecast of 1.5 percent, he said in a seminar.
State-wide job creation in Texas was likely to fall sharply this month by between 24,000 and 60,000 before rebounding in October by between 97,000 and 143,000 positions, Phillips said.
“Traditionally these big weather events have seen a pretty rapid rebound in jobs and I think that’s some good news for people that have been hard hit,” he said during a presentation by the National Association of Business Economics.
Wages refuse to budge
The beige book showed the Fed’s 12 districts portrayed a national economy facing worker shortages, and where many “expressed concerns about a prolonged slowdown in the auto industry.”
Automakers have seen moribund sales so far this year after a record 2016.
Growth on jobs markets continued but appeared to slow in most districts as companies struggled to find workers.
“There were reports of worker shortages in numerous industries, most notably in manufacturing and construction,” the report said.
“Firms in the Atlanta, St Louis and Minneapolis districts said they had turned down business because they could not find the necessary workers. Many districts indicated that businesses were having difficulty filling openings at all skill levels.”
Nevertheless, the anecdotal reports of labor shortages were for the most part not translating into higher wages, the Fed said.
The Labor Department reported this month that the unemployment rate had risen marginally last month to 4.4 percent, quite low by historical standards, but job gains slowed to156,000 new positions amid sluggish wage growth.
Policymakers and economists have been baffled by persistently weak inflation despite steady job creation and falling unemployment — leading to disagreements among Fed members about the need to hike interest rates a third time this year.
The beige book showed “the majority” of Fed districts reported “limited wage pressures and modest to moderate wage growth.”
In the Boston region, staffing firms saw falling revenues, “which they blamed on limited labor supplies” but prices rose “very little.”
The Cleveland region, however, was an exception, reporting rising employment and wages in construction and manufacturing, even as motor vehicle production trended lower.