Toward An Understanding of the Effects of Natural and Man-made Disasters on Unemployment and GDP -Or- Blame it All on Einstein

By Patricia L Johnson and Richard E Walrath

The massive earthquake registering 9.0 on the Richter scale struck Japan on March 11, 2011 and was followed by a gigantic tsunami causing untold damage resulting in the meltdown of three nuclear reactors at the Fukushima Nuclear Power Plant.

Cleaning up the mess required thousands and thousands of people which provided work for those who lost their jobs because of the earthquake, but these jobs did not add to GDP. They simply restored what had already been there (that is generally what happens when any natural disaster strikes. There’s more work to clean up the mess, but it does not add anything to GDP).

Surprisingly, Japan’s unemployment rate rose only slightly, but the real effect is in its revised GDP estimates.

The Daiwa Institute of Research Report dated June 1, 2011 downgrades Japan’s estimated GDP for 2011 from +0.8 percent to -0.3 percent due to what is now known as the “Great East Japan Earthquake”. GDP is being revised downward due to reduced production due to both impaired supply chains and power shortages as well as reduced personal spending due to lower consumer confidence.

The Federal Reserve estimated on June 22, 2011 that US GDP will only rise 2.7% to 2.9% in 2011, down from an April estimate of an increase of 3.1% to 3.3%. The two major concerns for the anticipated decrease in U.S. growth are the aftermath of Japan’s earthquake and rising energy costs.

Fortunately the United States has not experienced anything that could remotely compare to what Japan experienced on March 11, but we have our own share of incidents.

The list of potential disasters in this country is extensive and could be caused by any of the following: Dam failures, earthquakes, fire or wildfires, floods, hazardous materials, heat, hurricanes, landslides, nuclear power plant emergencies, terrorism attacks, thunderstorms, tornados, tsunamis, volcano’s, or winter storms.

Historically, economic damage cost-to-date in the US is around $6 billion dollars from a combination of winter storms, crop losses, spring flooding and severe weather. According to NCDC at NOAA, the economic damage costs for the period from January 1, 2011 through May 2011 are already $32 billion dollars, representing an increase of over 533 percent.

In 2011 we’ve already had a total of eight disasters costing over a billion dollars each as follows:

· Blizzard in central, eastern and northeastern states on January 29 – February 3, 2011. Estimated cost $3.9 billion; 36 deaths.

· Midwest/Southeast Tornadoes April 4-5. Total losses over $2.0 billion; 9 deaths.

· Southeast/Midwest Tornadoes April 8-11. Total losses over $2.2 billion; -0- deaths.

· Midwest/Southeast Tornadoes April 14-16. Total losses over 2.0 billion; 38 deaths.

· Southeast/Ohio Valley/Midwest Tornadoes April 25-30. Tornadoes over central and southern states. Total losses approaching 10 billion; 320 deaths.

· Midwest/Southeast Tornadoes May 22-27. Total losses may exceed $7.0 billion; 172 deaths.

· Texas Drought & Wildfires Spring-Summer 2011. Ongoing – Firefighting costs approximately $1 million/day, loss to agriculture and cattle $1.5-$3.0 billion.

· Mississippi River flooding Spring-Summer 2011. Ongoing – Preliminary losses $2.0 – $4.0 billion dollars.

NOAA has an interesting chart indicating billion dollars losses from 1980 through 2010 and may be viewed at the following link http://www.ncdc.noaa.gov/img/reports/billion/disasters2010.pdf

During the first six months of 2011, the United States experienced an exceptional number of “Major Disasters” [a ‘major disaster’ is declared after the following criteria have been met.]

We haven’t even passed the half-way point in calendar year 2011, and 45 major disasters have already been declared. This compares to an average of only 60 per year during the 10-year period from 2001 through 2010. In addition, eight emergency declarations have been made along with 71 fire management assistance declarations since the beginning of the year.

In total 39 of our 50 states have experienced some sort of disaster during the first six months of 2011, as listed below. The map at the end of this article will give you a graphic view of the massive amount of area in this country that has been affected by these disasters. States experiencing disasters are indicated in green.

You may view the details on any of these 2011 Federal Disaster Declarations as the following FEMA link: http://www.fema.gov/news/disasters.fema

The eleven states that have not declared a disaster are: Delaware, Maryland, Michigan, New Hampshire, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, West Virginia, and Wyoming. These states are indicated in yellow on the following map.

© 2011 Patricia L Johnson and Richard E Walrath

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One Response to Toward An Understanding of the Effects of Natural and Man-made Disasters on Unemployment and GDP -Or- Blame it All on Einstein

  1. Pingback: Not One, but Two U.S. Nuclear Plants in Harm’s Way | ARTICLES and ANSWERS 2011

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