Local Economist Says Katrina Effects Still Haven't Arrived

Fallout from Katrina and Rita hasn't really been felt yet and could wreak economic havoc on the nation this winter and next year. That according to University of Houston economist Barton Smith, who says higher energy costs will hurt other parts of the nation more than our area.

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Smith says increased heating costs this winter in the North and East combined with higher interest rates related to the hurricanes could help drive the economy down in 2006. "We see 2006 being a year of significant struggles for the American economy. Rather than what other people have been forecasting, bad second half for 2005 and rebound for 2006, what we're saying is that the second half of 2005 is not going to be as bad as people thought," he says.

He says not only did the hurricanes do physical damage, they also created what are known as energy shocks that disrupted the nation's energy supply, damage to the nation's economic infrastructure that could take a while to be fully realized. "If hurricanes were a good thing, we'd blow up half of Houston so we could rebuild it and create an economic stimulus. It doesn't create an economic stimulus, it represents a real loss to both the local area and to the national economy. It does stimulate jobs, but it also creates hurt," Smith says.

While Houston did see an almost immediate population increase after Katrina, Smith says that short term economic gain was gone almost instantly, with far less benefit to the local economy than some had predicted. He says there will be some positive economic news as areas rebuild. "There will be some benefits, benefits that will last probably more than a year. Houston businesses will play a role in the rebuilding of all impact areas, not just New Orleans, but all of the impact areas. Houston businesses will certainly play a major role in the rebuilding of our energy infrastructure," he says.

Smith says Houston is still on track for continued economic improvement over the next few years, with job growth steady, but nowhere near the robust rate seen in the late 90s. He says although the region continues to be dependent on energy, that mix will slowly change, leading a more diversified economy.

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