NEW YORK (CNN/Money) -
Though Hurricane Isabel has shut down Washington, D.C., for a day and threatens property damage across a wide swath of the U.S. East Coast, economists doubt it will make much of a splash in economic data.
Isabel, which began to make landfall in North Carolina Thursday morning, has grounded hundreds of flights, shut several train and metro lines, and closed government offices and an untold number of businesses along the Atlantic coast between North Carolina and Maryland.
What's more, the hurricane could do more than $1 billion in property damage, according to an estimate by AIR Worldwide Corp., a catastrophe research firm.
While such damage would place Isabel near the 10 most damaging storms in U.S. history, according to the Insurance Information Institute (III), it would be dwarfed by the $10 trillion U.S. economy. And much of it would be offset by increased construction activity, along with sales of flashlights, batteries, food and other emergency items.
"It's not necessarily a negative, from the point of view of economic growth," said Sung Won Sohn, chief economist at Wells Fargo & Co. "Even in Washington, D.C., the government work will be made up."
Impact on GDP seen as minimal
Hurricane Floyd, in September 1999, did about $2 billion in damage, according to the III, but affected the U.S. gross domestic product (GDP) growth rate by only about two-tenths of a percentage point, according to Lehman Brothers economist Joseph Abate.
Economists, on average, expect GDP to grow at a 4.5 percent annualized rate in the third quarter and a 3.9 percent pace in the fourth, according to the latest Blue Chip survey of economic forecasters.
Since Isabel is hitting during the week the Labor Department surveys employers about payrolls and worker hours and earnings, some of the data in September's unemployment report could be skewed to the downside. Weekly jobless claims could be artificially low this week and artificially high the next.
But the payroll number won't be affected, since people who work any part of the week are counted as employees, and any negative effects will be temporary and likely ignored by the Federal Reserve and financial markets, Abate said.
"On net, we'll see some damage and a hit to corporate profits and proprietors' income, but that effect is temporary," Abate said. "But in the next quarter, we will get some mild stimulus from the rebuilding. Certainly, it will have no major, permanent effect on the economy."
On the other hand, the final course and intensity of the storm is still unpredictable, flooding could significantly add to the total damage, and the region it's hitting hasn't had much experience with such storms, according to Mark Vitner, senior economist at Wachovia Securities, based in Charlotte, N.C.
Though he agreed that the net economic effect would eventually be negligible, given the stimulus of rebuilding, the storm could initially do more damage than AIR Worldwide expects.
"Given that it's going to reach such an extended area and that it will be an unusually wet storm, damages are going to be a lot worse than $1 billion," Vitner said. "So many homes, apartment buildings and shopping centers have been built in this part of the country that haven't been tested by a big storm. Now we're going to see just how good this construction has been."
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