INSIDE ECONOMICS

Mark Zandi:

Welcome to Inside Economics. I'm Mark Zandi, the Chief Economist of Moody's Analytics. I'm joined by two of my colleagues, Ryan, Ryan Sweet. Ryan's the Director of Real-time Economics. Big day for Ryan, a jobs day. We'll come back to that in just a minute. A lot to talk about there. Of course, I'm talking about the employment report for the month of August. A little disappointing, but we'll come back to that.

Mark Zandi:

And then Adam Kamins. Adam runs our regional economic analysis and he's here today to help, of course, dissect the jobs numbers. A lot to talk about there, regionally, and also, given Hurricane Ida, which really made a mess of things here in the Philadelphia and much of the country, we want to talk about that, and also, just more broadly about how we assess natural disasters and consider their economic impact. Both Adam and Ryan have done a lot of work in this area over the years, so we're going to talk about that as well.

Mark Zandi:

Did you guys get any damage from Ida? Did you navigate things pretty well or any problems?

Ryan Sweet:

We held up fine. The Brandywine Creek, which is right near us, really overflowed, flooded a bunch of businesses, and I just can't imagine. I mean, I felt like we got hit hard. I can't imagine what Louisiana went through when that thing made landfall. I mean, that was a massive storm.

Mark Zandi:

I know. I mean, we didn't really have the wind. We had a little bit of wind, but it was really the rain. My gosh.

Ryan Sweet:

Yeah, it was a lot of rain.

Mark Zandi:

Yeah, I'm on high ground at my home, but I have a stream, and when I say stream, I mean a stream, just a stream, maybe 30, 35 yards downhill, and that thing was raging. I've been in this home more than 20 years. I've never seen anything like it. My nextdoor neighbor, who's on lower ground, lost all of their backdoor stuff, chairs and benches and kids' playthings. All gone. All gone. Pretty amazing. Adam, did you navigate pretty well through the whole thing?

Adam Kamins:

We did all right. The worst effect for us was that the kids had to stay home yesterday, so it got a little ugly in our house, but other than that, no damage.

Mark Zandi:

Oh, they couldn't go to school.

Adam Kamins:

No, they closed schools yesterday.

Mark Zandi:

Oh, wow. Okay. Well, we'll come back to Ida and the economic damage. You put together some estimates. Or maybe give us a preview. What's the bottom line estimate of the property damage and the lost economic output for the northeast?

Adam Kamins:

Yeah. So, sort of putting it all together, the storm as a whole, it was $40 billion, give or take about $5 of 6 billion. So, the range that we're publishing right now is $34 to 48 billion.

Mark Zandi:

$48. Now, of that $48 billion, how much is property damage in the northeast?

Adam Kamins:

About half of that, I would say. So, the majority of the number is property damage, and then within that number, most of that is now from the northeast.

Mark Zandi:

Okay. So, let's just round. You're saying $50 billion for the total cost. That's property damage and lost economic output, but $25 billion or so is property damage in the northeast?

Adam Kamins:

More or less. That's the high end of the range, but that's right.

Mark Zandi:

Yeah. I bet that number's going to rise. It's going to rise.

Adam Kamins:

It's going to rise.

Mark Zandi:

Yeah, I don't believe that number. Sorry, but we'll come back to how you do that calculation. You know, I just got a call from my sister whose son lives in Philly and he had a car in a lot, the family car was in the lot... Oh, they have a home down in Philly, so he was staying down in Philly. The car was completely lost, flooded out, in this lot, in the middle of downtown Philadelphia. Hard to imagine that would be the case. So, I don't know. That just doesn't feel right. But anyway, we'll come back to that. We'll come back to that. You can defend your numbers.

Mark Zandi:

But talking about numbers, that jobs number, what the heck, Ryan? What's going on? Tell the listener, to summarize, what were the numbers and your interpretation.

Ryan Sweet:

All right. I do have to give you and Dante credit. ADP, this month, was very close. It was well below the consensus. So, the consensus was for roughly 725,000 net gain in non-farm employment. It came in closer to 230,000. I'm not too concerned. We knew job growth was going to slow. Yeah, we were looking for 500,000, which was at the very low end of the consensus range. There's a lot of things in August. You had the surge in COVID cases and you saw that in leisure hospitality, which created no new jobs in August, and you also have this August effect. You know, death, taxes, and a below-consensus August employment number are the only things guaranteed in life, and it came to fruition again.

Ryan Sweet:

Unemployment rate fell to 5.2%. Labor force participation rate was unchanged. So, all in all, it was a soft report, but as we've talked about, the job numbers are going to bounce around, they're going to be here and there. Over the last three months, we're still creating more than 700,000 jobs on average, and that's a very strong number.

Mark Zandi:

Yeah. Yeah. So, 235, and ADP are right. Just to let the listener in on this, ADP is a human resource company and we have a partnership with them. We take their data, which they provide to us for 23 million employees that they process payrolls for, and we construct an estimate of what we think the BLS number's going to be for the private sector. It doesn't include government, and we came in at what? We came in at, I can't remember, 350, or something like that.

Ryan Sweet:

Yeah, right around there. Yeah.

Mark Zandi:

And that's still on the high side, compared to what actually happened.

Ryan Sweet:

It is.

Mark Zandi:

Yeah, and your estimate was also closer than consensus, for sure. You were at 500K, I believe. Yeah, something like that.

Ryan Sweet:

Yeah, we were among the lowest in the consensus range.

Mark Zandi:

Yeah.

Ryan Sweet:

I mean, it still came in a lot weaker than I thought. The big surprise to me was leisure and hospitality. I thought COVID would hurt, but I didn't think it was going to have that significant of an impact. I mean, when you look at the industry detail, all the industries that are very sensitive to social distancing or COVID cases, really, really underperformed in August. So, I think COVID has made a big mark on August job growth.

Mark Zandi:

Yeah, I think the Delta variant was all over the report.

Ryan Sweet:

Yeah. No, I agree.

Mark Zandi:

I mean, restaurants, employment at restaurants. I think that was down during the month. And leisure and hospitality in aggregate, which includes restaurants, was flat. That sector had been adding several hundred thousand jobs per month as it normalizes, coming out of the pandemic. That feels very much related to Delta. Also, the global supply chain disruptions created by Delta overseas, it feels like that's in the report too. Right? Because there was a big decline in employment at motor vehicle dealerships, and that may be because they just can't sell cars, because there aren't any cars to sell.

Ryan Sweet:

Mm-hmm (affirmative)- Yeah. Yeah, auto inventories, new car inventories are near historic lows, and you can see it in the monthly vehicle sale numbers that we've gotten. This thing's just tanking like a rock. It's falling like a rock. It's down to 13 million annualized units. You know, that's low, and it's not that consumers don't have the cash or can't afford cars. It's that there's just not enough cars out there to buy, and that's coming at the expense of sales.

Mark Zandi:

Yeah, that's another good statistic that came out yesterday, a little over 13 million vehicles sold in the month of August, annualized. You know, just for context, kind of a typical sales level is about 17 million units, annualized, and 13 million, it's not as bad as it was in the teeth of the pandemic recession, but it's down a lot.

Ryan Sweet:

And that number crushed our high frequency GDP model, so this is model that we have. It's really like a bean-counting approach. It takes all the source data that the Bureau of Economic Analysis uses to calculate quarterly GDP, and we run it every day, and when you get new source data, this thing can move a little bit here and there. It went from 5.3% at an annualized rate down to 3.9% because of vehicle sales. It really hit consumer spending in the third quarter.

Mark Zandi:

Yeah, before we move on to Delta more broadly and what's going on with the economy, but clearly jobs numbers has suggested Delta's doing real damage to the economy, the economic recovery, and I want to talk a bit more about under what scenarios could it undermine the recovery, but we'll come back to that in a second. I just want to ask you a bit about that comment you made about August employment gains always coming in on the soft side. Do you want to explain that a little bit and what's the intuition or what's the logic behind why August?

Ryan Sweet:

So, the primary reason is that the response rate to the survey that the Bureau of Labor Statistics sends out to establishments always comes in low. So, when you get a low response rate, typically, you're going to see a low initial print, a below-consensus number, and then as they get more and more responses, you're going to see an upper revision. So, this number is disappointing, 230, but I would suspect by the time we get the second and the third revision, it's going to be higher.

Ryan Sweet:

So, on average, now this is pre-pandemic, the average revision between the first and the final estimate of August employment is positive 70,000. So, maybe the pandemic juices that a little bit, but when it's all said and done, 230 is going to be the low end of the estimate.

Mark Zandi:

So, you're saying if history's any guide, it may end up, after revisions, being 300K, not 230K?

Ryan Sweet:

Yeah, and, I mean, recently, we've been seeing a lot larger revisions. I mean, last month, correct me if I'm wrong, it was like 964, 964,000.

Mark Zandi:

Yeah.

Ryan Sweet:

Now it's 1.05 million. So, I mean, we're getting some big upper revisions. So, in the end, I don't think it's going to be as glaring of a disappointment. Still going to be a disappointment, but it's not going to be as bad as it looks right now.

Mark Zandi:

Right. I mean, in our forecast, our outlook, we have average monthly job growth over the next 12, more like 18 months, of about 500K. So, that assumes some months are going to be like last month, when we got over a million, and some months like this month, when we got 250K, on average, 500K. You still feel pretty comfortable with that?

Ryan Sweet:

On average, yeah. I think September, and we'll get to this when we talk about Hurricane Ida, but odds are that's going to affect the September numbers. So, we're going to see another month where... a little mediocre job growth...

Mark Zandi:

Soft.

Ryan Sweet:

... and then I think we pick back up when we're on the other side of the Delta variant and the rebuilding begins to commence.

Mark Zandi:

Okay. Hey, Adam, let me bring you in on the conversation. Anything you're observing around the job market regionally? Any insights? I mean, are you noticing any weakness in, for example, the southeast, Florida, where the Delta is more of an issue? Are you observing any of that?

Adam Kamins:

We are, yeah. So, I think, obviously, we don't have the August numbers and we won't for a few weeks, but what some of the real-time data seem to be showing, this is data from Open Table on seated diner reservations, and Google mobility data on retail and recreation and the amount of time that people are spending in those establishments, you've seen that fall off pretty noticeably in a number of southeastern states. So, Florida, although weirdly in the last week, the Open Table shot up for Florida, so actually, our back-to-normal index is way up there.

Adam Kamins:

But that kind of parenthetical aside, we've actually seen Florida, Louisiana, Mississippi, a number of states in the southeast really starting to fall off in the real-time data. There's some traces of evidence of that even in the July numbers that were the beginnings of the Delta surge were happening, that those states were weakening. So, there's definitely a relationship there that we're observing.

Mark Zandi:

Okay. Ryan, we typically play a game with the statistics where we spout out a statistic that we think [crosstalk 00:13:06]

Ryan Sweet:

I got a good one.

Mark Zandi:

... the other guys guess. Does you have a good one that's related to the jobs numbers? Otherwise, I don't want it.

Ryan Sweet:

Related to jobs, here's your hint. You don't want it?

Mark Zandi:

Well, unless it's apropos. I don't want [crosstalk 00:13:18]

Ryan Sweet:

Yeah, it's related to the jobs number and it's related to the Delta variant.

Mark Zandi:

Okay. Oh, okay.

Ryan Sweet:

This is a big clue.

Mark Zandi:

Okay.

Ryan Sweet:

Ready?

Mark Zandi:

Okay. Fire away. Adam, you ready?

Adam Kamins:

I'm ready.

Ryan Sweet:

5.6 million.

Mark Zandi:

Okay, 5.6 million. Is that number of longterm unemployed?

Ryan Sweet:

No.

Mark Zandi:

You were about to say that could be.

Ryan Sweet:

Yeah, I know. I was [crosstalk 00:13:46] because I don't want to give you any clues.

Mark Zandi:

It could be. It could be pretty close to that number.

Ryan Sweet:

Yeah, it could be, but it's not the number I'm thinking of.

Mark Zandi:

It's not the number you're thinking of. 5.6 million. It's also related to the Delta variant, you said.

Ryan Sweet:

Correct.

Mark Zandi:

Job market, Delta variant. Adam, any idea?

Adam Kamins:

Man...

Mark Zandi:

In the Delta variant.

Adam Kamins:

I'm trying to think if it's something to do with cases or vaccinations or something along those lines.

Mark Zandi:

No.

Ryan Sweet:

No, it's in actually written up in the labor market release.

Mark Zandi:

Oh, the BLS? Oh, I thought I read it. 5.6 million...

Ryan Sweet:

You've got to read these things carefully.

Mark Zandi:

I know. You're down into the bowels of these reports.

Ryan Sweet:

You've got to look at the footnotes.

Mark Zandi:

Yeah. You want to give us one more hint or you'll give it away probably at that point?

Ryan Sweet:

We've talked about it before on the podcast.

Mark Zandi:

We have. Okay. 5.6 million. Hmm. I don't know. Fire away.

Ryan Sweet:

All right.

Mark Zandi:

What is it?

Adam Kamins:

The longterm unemployed or something?

Mark Zandi:

That's what I said. You're not paying attention.

Adam Kamins:

You said, that's right. Yeah, yeah.

Mark Zandi:

What, are you trying to take my...

Adam Kamins:

Yeah.

Ryan Sweet:

5.6 million, it's up from 5.2 million in July, and it's the number of people that were unable to work because of COVID, either shut down their employer or temporarily closed.

Mark Zandi:

Oh. Okay, that is a really good statistic to watch. So, 400K increase in the month.

Ryan Sweet:

Mm-hmm (affirmative)-

Mark Zandi:

And it had been steadily declining. Since back last spring, has it risen at all? It's always been pretty [crosstalk 00:15:12]

Ryan Sweet:

I don't think. I think it's been steadily declining. Yeah.

Mark Zandi:

Okay. Well, that's interesting.

Ryan Sweet:

Yep. So, as soon as I saw that, I was like this report, this weakness...

Mark Zandi:

This is COVID.

Ryan Sweet:

... August effect. It's all COVID.

Mark Zandi:

Yeah, right. Okay. Adam, I'm guessing you have a statistic you want to throw in as well, right, that you want us to guess? Is it related to the job market?

Adam Kamins:

You know, I had one. I think it's pretty obvious now, but I'm going to give you a little twist on this. So, I'm going to give you...

Mark Zandi:

But I don't want to hear it unless it's related to the job market.

Adam Kamins:

Well, I have one for later too, but I'll save that. I have a natural disaster one, but that's later.

Mark Zandi:

Okay.

Adam Kamins:

I can give you a job market one.

Mark Zandi:

Okay, fair enough. Go ahead.

Adam Kamins:

All right. I'm going to give you two, and this is sort of related to what we were just talking about, so this might [inaudible 00:15:57] the softball, here, but...

Mark Zandi:

Well, don't press your luck here. I mean, come on. Give us one and let's see if it's any good and then we'll go on to the two.

Adam Kamins:

Well, they're related, but okay.

Mark Zandi:

Yeah, okay.

Adam Kamins:

-.27%.

Ryan Sweet:

Now we're going out two decimal places?

Adam Kamins:

It's from the jobs report too.

Mark Zandi:

It's in the jobs report today?

Adam Kamins:

Yes. Yeah. And it's something related to what we're talking about. The other number that is sort of a related number to that is 1.7%, 1.698%. They are two related metrics.

Ryan Sweet:

It can't be anything with wages. Wages shot up in August.

Mark Zandi:

Yeah, no, it's not wage growth, and by the way, that wage growth number, that's all mix. Right?

Ryan Sweet:

Correct. Yeah. I ignore that number.

Mark Zandi:

We saw a big increase in wage growth in the month and that's because we saw a lot of weakness in retail, leisure, hospitality, which are low-paying occupations jobs, because this measure doesn't control for mix, we saw this big increase. So, it's misleading. Not that wage growth is weak. It's held up really well, done pretty well, but this number overstates the case, to a significant degree. So, it's not that.

Ryan Sweet:

Is that hours? I thought hours were unchanged.

Adam Kamins:

No, it's related. It's an employment number.

Mark Zandi:

Oh, it's not in the report.

Adam Kamins:

It's a change in employment.

Mark Zandi:

Oh. It's in the report.

Adam Kamins:

It's in the report.

Mark Zandi:

Oh, he's picked out on sector that was down 270,000 jobs for the month.

Adam Kamins:

Yeah, pretty much.

Mark Zandi:

Oh, that's bogus.

Ryan Sweet:

Yeah, it's a career employment... Yeah.

Mark Zandi:

Yeah, okay. Oh, wait a second. [crosstalk 00:17:36]

Adam Kamins:

It's all sectors.

Mark Zandi:

Okay. Wait, wait, wait. 270,000. Okay, that's a big number.

Adam Kamins:

No, no, it was -.27%.

Mark Zandi:

Oh, percent.

Adam Kamins:

Percent. [crosstalk 00:17:50] It's two month-to-month changes that are in the jobs report. All right. One is -.27%. One is 1.69, 1.7%. They're two related industries that we've already been kind of talking about here.

Mark Zandi:

Oh.

Ryan Sweet:

Restaurants?

Adam Kamins:

Yeah, one is restaurants.

Ryan Sweet:

Yeah. Is the other one +1.7?

Adam Kamins:

The other one's +1.7.

Ryan Sweet:

Professional and business services?

Adam Kamins:

No, it's the other... I can just tell you.

Mark Zandi:

Yeah, go ahead.

Ryan Sweet:

You're torturing us.

Adam Kamins:

All right. So, we're talking about accommodations and restaurants was -.27. Right? That's the element of the jobs report, of leisure hospitality, that's more about people traveling, going out to eat. The other one is NAICS code 71, the related NAICS code, the other industry. Right? That is people going to games and movies. Right?

Mark Zandi:

Wait a second. You know, this is over the top.

Ryan Sweet:

Is it too late to revoke his invitation?

Mark Zandi:

I know. I'm thinking that. He said he had another one, another statistic?

Ryan Sweet:

Oh, I don't know.

Mark Zandi:

I don't know either.

Adam Kamins:

Yeah, you steal my thunder a little bit here. I probably went a little too deep.

Mark Zandi:

A little?

Adam Kamins:

All right. The point that I'm trying to make here...

Mark Zandi:

What's the point?

Adam Kamins:

... is that accommodations, food services, restaurants, hotels, they're down. I think that reflects the lack of consumer confidence, concern over Delta.

Mark Zandi:

That reflects Delta.

Adam Kamins:

Right.

Mark Zandi:

Okay. All right.

Adam Kamins:

Yeah, I'm getting there.

Mark Zandi:

Okay.

Adam Kamins:

NAICS 71, the other piece of this, right, that would be things like, again, concerts, and ball games, and movies.

Mark Zandi:

Oh, okay.

Ryan Sweet:

Yeah, that's interesting.

Adam Kamins:

And that's still going on, and what I think is striking in some of the data here is that you're still seeing a lot of reopening momentum taking place. Right? And so, one of the things I'm looking at, I keep looking to see if New York City, for example, is going to change its plans about reopening Broadway next month, or actually this month now, in light of Delta. And they're not. Right?

Adam Kamins:

It seems like businesses, local governments, everyone's kind of plowing forward, but consumers themselves are spooked by Delta, and I think that's what's really driving some of these numbers. So, I thought that was an interesting statistic too.

Mark Zandi:

Hmm, I guess that's interesting. Okay. I'll give you that, that the recreational activities continue to advance and hire jobs, but it doesn't square with loss of jobs at restaurants and flat overall leisure hospitality, right? I mean, that suggested businesses are pulling back. Right? That the reopening isn't proceeding like it certainly was just a month or two ago because of Delta.

Adam Kamins:

Well, the momentum is slipping. It's decelerating, but the degree to which it's decelerating is really different. Right? So, I think in restaurants and in hotels, you're seeing a really sharp deceleration. I think demand has dropped really noticeably, but I think for events, for shows, for games, et cetera, you're still seeing demand looking pretty healthy for that, relatively speaking.

Mark Zandi:

Yeah. I had thought, all right, maybe this is more a hope than a thought, that businesses would look through Delta. That yeah, right, Delta is definitely causing consumers to be more cautious, pull back a little bit, travel a little bit less, go to restaurants less, but they're going to look through that and continue to hire because they know that they've got 10 million open job positions and that Delta's going to go away at some point and they're going to be back right at trying to hire people, and if they kind of stop the train right now, they're going to have more difficulty a month or two or three from now, starting the train back up again. That's what I had hoped for.

Ryan Sweet:

I think that's still true.

Mark Zandi:

You do?

Ryan Sweet:

Yeah. I agree. I don't think they're going to slow down their hiring. I think the weakness of August was...

Mark Zandi:

No, but they are. Right? Aren't they? Or you're saying it's overstated because of [crosstalk 00:22:02]

Ryan Sweet:

It's overstated. It's overstated. I mean, really, we've got to look through the ups and downs of August and September because there's going to be these idiosyncratic events, Delta, next months of hurricane, and it's going to look like businesses are pulling back on hiring, but they're not unless Delta prevents people from coming back into the labor force. They have 10 million jobs, but they need people to fill these, and the Delta variant, if it causes schools to shut down or if people are just too nervous to go back into the labor force, worried about getting family members sick, then that's really going to be what drives the weakness in hiring. It's not a demand issue. It's a supply.

Mark Zandi:

Hmm. Okay, and then maybe, Adam, just to be fair, I guess what you're suggesting is because these recreational activities, the industries, like Broadway or ball games or concerts, that they're continuing to add to payrolls, which they did in the month of August. That's consistent with what I just said, that businesses are kind of looking through this, to a significant degree. That's what you're suggesting.

Ryan Sweet:

Yeah.

Adam Kamins:

Yeah, that's what I'm suggesting. [crosstalk 00:23:11]

Mark Zandi:

You're looking on the upside here. You're looking on the bright side.

Adam Kamins:

Right. Businesses are looking through and I think the supply of leisure is still out there. Right? And to Ryan's point, that if businesses are continuing to look through and if things are still kind of proceeding, then, yeah, there's not too much to worry about in the months ahead, I don't think, if Delta doesn't sort of continue to intensify or get significantly worse.

Mark Zandi:

Right. Okay. Hey, one other question I had before we talk a little bit more about Delta, is this debate around the supply of labor. I guess September was supposed to be a pretty big month for people coming back to work, schools reopen in-person learning, and, at least in my view, probably the most significant constraint on people coming back to work, and the emergency UI benefits, the unemployment insurance benefits, rolling off the supplemental unemployment insurance benefit, that goes away, I think, almost all states. Maybe some states have kept it. They're able to if they want to.

Mark Zandi:

And the pandemic unemployment insurance for gig workers, contract workers, that came off. Anything in the data that would suggest more labor supply coming into the economy because of these things? Anything in the numbers?

Ryan Sweet:

Not in August.

Adam Kamins:

Not in August.

Ryan Sweet:

Adam can speak more about the regional, but all three of us dug through that report.

Mark Zandi:

Yeah.

Ryan Sweet:

I couldn't find any evidence that states that ended UI benefits early, in June and July, saw a big increase in either labor force or job growth. You know, I think the UI is at the bottom of the list of reasons why people aren't reentering the labor force.

Mark Zandi:

Yeah.

Adam Kamins:

If anything, those states went backwards in July, I think, because I mean, one, many of those states are states where Delta is surging and that just matters a whole lot more than cutting off benefits.

Mark Zandi:

Okay.

Adam Kamins:

And I think also, right, if we're not seeing much upward pressure on labor force participation or people reentering the labor force, what you're seeing in the other direction is that there are some people who were receiving benefits who are now not, so incomes are going down. And so, right, that's a net negative for the economy. Both of those facts, I think we're seeing sort of the reverse of what maybe some of the states that implemented those policies were hoping.

Mark Zandi:

Yeah, I guess bottom line, the participation, the labor force participation rate held steady at 61.7%, and that's really not changed very much in recent months, and so it doesn't suggest that labors coming back in, in a significant way yet. They're not leaving, but they're not coming in, in a significant way. You know, and I suppose, just to point out, there's not going back, I don't think, to the 63%+ participation rate that existed pre-pandemic because you've got a lot of boomers, baby boomers, people in their 50s, 60s, and 70s that left the workforce during the pandemic. It doesn't feel like they're coming back. Right? I mean, they retired.

Ryan Sweet:

Yeah, I agree.

Mark Zandi:

[crosstalk 00:26:19] Housing values are up.

Ryan Sweet:

Exactly.

Mark Zandi:

Yeah, their nest egg is pretty large. They're out of here. Okay. I mean, we have in our forecast, participation rising about a point from here over the next 12, 18 months, but there's no going back to where we were. Yeah. Okay. Hey, just to kind of round things out on Delta, because that clearly is top of mind here, and I think my read of what you guys are saying is okay, it's doing some damage, but it's not going to derail the recovery by any stretch, and hopefully the infections start to wind down a bit. Hopefully the UK. Their experience where Delta has petered out is a good case study for our future.

Mark Zandi:

Then we kick back into gear and get some bigger job numbers down the road. So, no big deal. Let me ask this. Under what circumstances does it become a big deal. I mean, what would you be looking for to gauge whether you're not getting the severity of the virus, and more importantly, I guess, the fallout on the economy, the impact on the economy? So, what kinds of things are you looking at to try to gauge that?

Ryan Sweet:

Well, I'll give you mine and then I'll Adam... School closures. So, I'm keeping a very close tab on the number of schools that are closing down because a lot of schools have protocols in place. I mean, just a few days before my son's elementary school opened up, they sent home a letter saying, "All right, here's the criteria. If case counts hit this, then it's mass social distancing, no lunch all..." So, they have all these procedures and I think if schools start to shut down and go back virtual, then that's going to be a big hit to the labor supply, and that's going to delay when we start to see an increase in job growth, because the demand's still going to be there. We're still going to have 10 million job openings. It's the labor supply that's going to take a long time to come back, if we get this surge in school closures.

Mark Zandi:

Yeah. I think I got this right, but I heard that two school districts in Florida went back to online, that they closed because of increase in infections.

Ryan Sweet:

Mm-hmm (affirmative)- Yep.

Mark Zandi:

That can't be a good sign.

Ryan Sweet:

No, it's not.

Adam Kamins:

I think it was their first week. They didn't even get out of the first week.

Mark Zandi:

Right. And, of course, kids under 12 haven't been vaccinated, so high potential of getting sick. You know? Adam, what about you? What are you looking at?

Adam Kamins:

I'd agree that school closures are top of mind here. I mean, the other thing, I think, is important to keep an eye on is the degree to which there are more breakthrough infections, and the thing that could be the game changer to me is the breakthrough infections keep rising or we start to see breakthrough hospitalizations or deaths. I mean, both, because obviously, that signals that our best defense here has just be compromised, but also because this is more of a regional shock, I think, at the moment still. It's plowing through states with high unvaccinated rates. If it starts to really affect states in the northeast and the west coast where vaccination rates are high, those are the states that have really been aggressive about closing back up again. And so, that, I think, is a recipe for a broader, potentially national, setback.

Mark Zandi:

I'll have to say, the impact, I think, has been broader than just those regions. I mean, it's affected people's thinking. I mean, you can see in the consumer sentiment measures the Conference Board Survey of Sentiment, which is very labor market oriented, which is the labor market's been very strong. That really tanked in August, and that came after the University of Michigan survey, that's tied more to financial conditions like the stock market, and that's tanked both. So, this is clearly weighing on people's thinking, and it's certainly on mine. I mean, maybe I'm projecting.

Mark Zandi:

I mean, again, this is more a hope than a thought, but I thought when the vaccines came out a few months ago, that done and dusted, as they would say on Peloton, this is over, or at least not a big deal going forward. But the Delta's made it very clear that this thing is not over and can have serious impacts, and it's having an impact on me. Like, I'm now much more reluctant. I just canceled my trip to Europe for early October because, in part, they're not back to work either, and so it's hard to have meetings, but the EU, the European Union, just made it more difficult to travel to the EU for Americans, and I'm just nervous about traveling with so many cases out there, and breakthrough infections. You know, the vaccine's not insulating people from the virus.

Mark Zandi:

So, it feels like this is having a really dampening effect on the collective psyche and more of a impact than I had expected. And so, if the infections continue to rise here, and I agree with you, Adam, if you see more breakthrough infections, the vaccines just don't insulate people as well as we thought from this, this is going to do more damage. It's going to be more of a problem. We're already marked down our forecast. Right? I mean, as you pointed out, Ryan, Q3 GDPs tracking 3.9% and my guess is that's not the end of it. We're going to see some further markdowns.

Ryan Sweet:

Because we incorporate only one piece of evidence for our data for August, and that's vehicle sales. So, we have a lot more August data to come in and this is when cases are surging. So, I think Q3 GDP's shaping up to be much weaker.

Mark Zandi:

Yeah. Well, I guess the other thing is you mentioned to me about the GDP tracking. You were at 3.9% but a big chunk of that is just simply inventories. Right?

Ryan Sweet:

Yeah. Yep.

Mark Zandi:

We had this huge inventory decline because producers couldn't produce enough to meet the demand, and now, there's going to be less of an inventory draw down, or maybe a little bit of an inventory accumulation, I'm not sure which, and that swing means that a big chunk of the GDP growth is nothing but inventory. Is that right?

Ryan Sweet:

Yeah, a great point. So, if you strip out inventories, GDP's tracking at less than 1%. So, excluding inventories, we're crawling now.

Mark Zandi:

Yeah. That's disconcerting. We've got to get to the other side of this Delta variant pretty quickly here, I think. Otherwise, it's going to really be more of an issue. Okay. Anything else on Delta we should be considering thinking about or wondering? I mean, I did mention what's going on overseas. I think we can't discount the importance of what it means. Did I mention the Chinese port shutting down? Did I mention that on the podcast? I can't remember.

Ryan Sweet:

We've talked about it before. We didn't talk about it today.

Mark Zandi:

Yeah, did we? Okay. It's an anecdote, but I think it's representative. I mean, China shut down, I think they've reopened it more recently, but they did shut down a terminal in a major seaport because of COVID, because of Delta, and that, obviously, disrupted all the shipping from China into the rest of the world, including the U.S. for goods for the Christmas buying season. And a number of chip plants in southeast Asia, which are key to the global supply chain, they shut down because just people were too sick to work, and that's now rippling through the global auto industry and an increasing number of auto companies are shutting down, which means that's going to undermine sales as well.

Mark Zandi:

So, the Delta is not only about what it's doing to the collective psyche here in the U.S., not only about what it's doing in the parts of the country where vaccinations are light and infections are rising, but it's also what's going on globally. You know, it's an issue. So, yeah, this is, I think, more of a deal than I had hoped or thought it would be just a few weeks ago.

Mark Zandi:

Okay. All right. Let's move on. Another thing to worry about. Hurricanes. Gee whiz, if it's not one thing, it's another. Come on. Please, cut us a break. By the way, in the grand scheme, I know I'm pontificating a little bit here, but I just thought I'd point this out. When you think about it, we've been nailed, we, meaning the collective we, have been nailed by some pretty major shocks in recent decades. Right? I mean, 9/11. That was a pretty massive shock that we're still paying for. You can see it on TV screens as we pull away from Afghanistan. I mean, the cost of that thing has been enormous.

Mark Zandi:

And then, we had the financial shock, the sub-prime mortgage crisis that was 2008, 2009.

Ryan Sweet:

Don't forget about Katrina.

Mark Zandi:

I forgot about Katrina.

Ryan Sweet:

2005.

Mark Zandi:

That was 2005, and by the way, we're going to come back to that in just a second, and then now, this pandemic, which is enormously costly. So, it's like cut us a break. Please. And then they throw a hurricane at us, so real set of challenges for us, economically.

Ryan Sweet:

It's all my fault.

Mark Zandi:

It's your fault? Why?

Ryan Sweet:

Because I joined Moody's, still, it was Economy.com at the time, in 2005, in July. So, then we had Hurricane Katrina, and then we had the great financial crisis. All this has occurred since I became a business economist.

Mark Zandi:

That is interesting. I'm sure there's causation there, not correlation.

Ryan Sweet:

There is definitely.

Mark Zandi:

Yeah, I'm sure. But I'm going to watch you. We're going to call it the Sweet disaster index or something.

Ryan Sweet:

Mm-hmm (affirmative)-

Mark Zandi:

Hey, Adam, when did you join? Did you join before Ryan?

Adam Kamins:

No, I actually joined right after Sandy. So, we all benchmark our time by what natural disaster hits.

Mark Zandi:

Oh, that's funny.

Adam Kamins:

Yeah. Yes, 2012.

Mark Zandi:

So, okay. Hurricane Ida, give us the lowdown, Adam, on that one. How big a deal is this going to be, in terms of the economic data and statistics?

Adam Kamins:

All right. So, well, first of all, clearly a bigger deal. You think it's a bigger deal than I do.

Mark Zandi:

Oh, yes. Exactly.

Adam Kamins:

So, whatever I say, just double it. Whatever.

Mark Zandi:

My anecdotes say it's going to be bigger. That's all I'm saying.

Adam Kamins:

So, from a macroeconomic perspective, it's not a huge deal, and that generally is the case with hurricanes. I think there's one exception, and that's Katrina, and even Katrina, I don't think was a national shock. That was a longterm regional shock, and the way most of these others are. They're shocks that last maybe a month or two, but generally, you get rebuilding, you get reopening of businesses, and very little evidence of changes in migration patterns or anything along those lines in the longer term, coming out of these disasters.

Adam Kamins:

So, I don't think this is a huge deal, in terms of the business cycle or where things are going, but having said that, it's a big deal for Louisiana, certainly, in the near term. I think that's a real concern, and really, I think, highlights some long-term risk in the northeast around climate change, in general. I think this is a really harsh reminder of that. And then, there's potentially a little bit of an impact on gasoline prices and on the energy market, although it does seem like, unlike Harvey and Katrina, that there wasn't a lot of damage to the refineries and to the pipelines, themselves. I think they reopened pretty quickly.

Adam Kamins:

So, that's what I think one of the more common channels by which hurricanes can have a pretty significant widespread macroeconomic impact, and I don't think we're going to see that here.

Mark Zandi:

Okay. Okay. So, just to summarize, in my simplistic way of thinking of things, there's three key channels through which a storm like this can impact the economy. One is the obvious physical damage to property, to public infrastructure, that kind of thing, which, in this case, that's where I was arguing it may end up being larger than our current estimate. Second is the economic disruption, lost power which disrupts businesses, people can't get to work, which is obviously the case in the northeast. Your kids not going to school would be an example of that. And just lost economic activity.

Mark Zandi:

And then, the third channel is through the energy markets because these storms blow through the Gulf. A lot of energy production and a lot of refinery activity along the coast, that gets disrupted. That's certainly happened in past storms. That causes oil prices, natural gas prices, and gasoline and electricity prices all rise, and, of course, that sucks the energy out of the economy, because if you have to pay more to fill your gas take, you have less to spend on everything else. That's kind of the frame. Right?

Adam Kamins:

I think that's right. I think, maybe number three there, we could think of it more broadly as just supply chain disruptions, but I think the most frequent supply chain disruption is to energy markets.

Mark Zandi:

Okay. Yeah, good point. Which storm was it that kind of destroyed the port of New Orleans and caused all kinds of havoc?

Ryan Sweet:

Katrina.

Mark Zandi:

Was that Katrina?

Ryan Sweet:

Yeah.

Mark Zandi:

Yeah, Katrina.

Ryan Sweet:

And there's a lot of concern that we're going to see gas prices rise like we did after Katrina, but what people forget, I think, is Katrina hit August 29th, 2005. A week later, Rita came through almost a similar path, and that hit the Gulf Coast as well, so these oil rigs, gasoline refineries, were shut down for a longer period of time. They're already getting back up and running after Ida. So, I don't think we're going to see a big surge in gas prices.

Mark Zandi:

Yeah. Well, I mean, last I looked, gasoline prices have already come back in. Didn't they? I don't think they've [crosstalk 00:40:32]

Ryan Sweet:

They're going to go back up. Gasoline futures rose yesterday, and they usually lead retail gasoline prices by one to two weeks.

Mark Zandi:

Is that related to Ida or something else?

Ryan Sweet:

It's related to Ida.

Mark Zandi:

Oh, it is. Oh, okay. Okay. So, bottom line, Ida, at most right now, you're estimating that the property damage plus the lost economic activity, $50 billion, all in. That includes what happened to Louisiana, what's happened to the northeast. That's your current estimate.

Adam Kamins:

That's the current estimate. Now, the one thing I'll say in response to what you were saying earlier, a number, by the way, that you signed off on, not to point fingers here, but...

Mark Zandi:

No, no, no, no, no. Yeah.

Adam Kamins:

I'm just kidding.

Mark Zandi:

I should say this out before you say anything more. You're like a swat team for natural disasters. Every time there is a natural disaster, and, as you pointed out, there has been many and there are going to be many more because of climate change, you're on the case, and you are trying to figure out what is the economic liability, the cost of all of this. So, you do that for hurricanes. You do that for flooding. You do that for wildfires, earthquakes, whatever it is. So, you are our natural disaster guru. So, you know what you're doing. That's why I don't question it.

Mark Zandi:

Well, I question it, but I sign off on it. Let's put it that way.

Adam Kamins:

Yeah, that's all right. Yeah, I'm like the grim reaper. If you see me, you know something terrible either has happened or is about to happen. So, generally, I think you're right. I'm thinking $50 million at the moment. Now, what's a little bit squishy with these numbers...

Mark Zandi:

$50 billion, $50 billion.

Adam Kamins:

Right, at sort of the top end, but to your point, I think it's very difficult to get a handle. So, the Louisiana part of this, I think, was easier to get a handle on. Property damage and on lost output. It's a relatively small geography that was hit the hardest. It was clear the extent of the damage in some of the coastal areas of Louisiana. New Orleans actually wasn't hit that hard, comparatively. The power outages are a big deal, but the physical damage was much more pronounced if you go a little bit south of New Orleans and into the coastal areas.

Adam Kamins:

In the northeast, it's a little bit more complicated because you have such high population density, such high housing density, much higher house prices and property values in the area that was hit in the northeast than in Louisiana. So, it means that there's a ton of value at risk. So, if we're thinking kind of a worst case scenario here, as this is passing through and we think that 5-10% of homes suffered significant damage or something like that, that is unbelievably costly.

Adam Kamins:

I think what we need to still get a handle on, we're just starting to see it now, is just how widespread the damage was. We know that there's, again, this broad geography where there was damage. My suspicion is as you're going kind of county to county, through the New York, New Jersey, Pennsylvania area, there's some areas of other devastation, but most areas came through okay. And so, because of that, I've kind of discounted the number a little bit and assume that we're looking at maybe 1-2% of the housing stock, for example, that suffered really significant damage, but if I'm underestimating there, definitely, we'll need to revise that number higher.

Mark Zandi:

Yeah. Okay, fair enough. I think one of the things that made Katrina, and you may have mentioned this already, I'll just repeat it, so devastating, and I think the cost in today's dollars of Katrina were closer to $200 billion, just for context, so, we're talking to Ida, $50 billion, Sandy, maybe $100 billion, Katrina, $200 billion, big deal, was that it dislocated a big chunk of the population, a large number of folks from New Orleans actually left. They literally moved to Houston and other parts of the country, and you can see it in the data. I mean, if you look at employment or population in New Orleans, you can quickly see when Katrina hit. It was an inflection point.

Mark Zandi:

But we don't see that, do we, in other cases? Are there any other cases, and I know you've done some work looking at the fires in California and the impact on people's location decision, where they're going to live, and you've not noticed any impact, after controlling for all kinds of stuff? Do I have that right?

Adam Kamins:

Yeah, that's right, and interesting. I should have gone with the other number. My other number was going to be the number of people that left New Orleans in the aftermath of Katrina...

Mark Zandi:

Oh. What was it?

Adam Kamins:

... that would have been a little less obscure than NAICS code 71. So, that was about 350,000 people that left. About one in three residents of New Orleans left between mid-2005 and mid-2006, and many of them never came back. It's still 100,000 residents in the hole from where it was beforehand.

Ryan Sweet:

Adam's point about people not returning to New Orleans also gets back to you got hit by two hurricanes in roughly two weeks and the levies broke during Katrina and flooded New Orleans. So, people really couldn't go back. This time around, fortunately, the levies held and we avoided a repeat of what happened after Katrina.

Mark Zandi:

Yeah. Okay. Hey, just as an interlude before we move on, I just want to play a little bit of the statistics game, just because it'll break it up a little bit. I don't know if I asked this before, but we purchased this Moody's, purchased this firm called 427. 427 is a Berkeley-based group that tracks climate-related weather events and rates the risk of a climate event by property. So, I could give them my address and they'll come back and say, "Okay, you're at high risk of flood, low risk of earthquakes. Your overall risk is this."

Mark Zandi:

Based on that data, and here's the question, and this goes to combining regional with natural disasters, which metropolitan area in the country do you think is at most risk from climate events?

Ryan Sweet:

Miami.

Mark Zandi:

Climate-related events.

Adam Kamins:

That would have been my guess too.

Mark Zandi:

Everyone says Miami.

Adam Kamins:

But it's not. I feel like I've heard this before. Yeah.

Mark Zandi:

You have heard this before?

Adam Kamins:

I can't remember what it is though, so it'll be new again.

Mark Zandi:

Oh.

Adam Kamins:

But I think I head it, but it's not Miami.

Ryan Sweet:

It's New Orleans?

Mark Zandi:

No, it's in Florida.

Ryan Sweet:

It's in Florida?

Mark Zandi:

And the only reason I remember this is because, this is my hint to you, my wife is from this metropolitan area, not that that's going to help you at all, but...

Ryan Sweet:

And it's not where you have your vacation home?

Mark Zandi:

It's not Vero Beach. No.

Ryan Sweet:

Okay.

Adam Kamins:

No.

Mark Zandi:

Daytona Beach, Florida. Isn't that interesting? Daytona Beach, Florida.

Ryan Sweet:

Wow.

Mark Zandi:

How many metropolitan areas are there in the country right now?

Adam Kamins:

About 400, 402.

Mark Zandi:

402.

Adam Kamins:

Including divisions, but yeah. 402.

Mark Zandi:

In over 402 areas, Daytona is the most at risk of natural events. Okay, here's another question for you, another quiz. What was the total amount of economic loss, property damage and lost economic activity in 2005? Katrina is a couple hundred billion...

Ryan Sweet:

Is this the number you're getting from the BEA?

Mark Zandi:

This is from a reinsurer, Aon.

Ryan Sweet:

Oh, okay.

Mark Zandi:

Aon, obviously, they're very focused on this as an issue because they've got to pay out claims, so they've come up wit some pretty good estimates. Just roughly speaking, what do you think it is?

Ryan Sweet:

$125 billion.

Mark Zandi:

No, $200 billion was Katrina, so it has to be more than that. Right?

Ryan Sweet:

Oh, for all of 2005? [crosstalk 00:48:43]

Adam Kamins:

Since 2005?

Ryan Sweet:

Yeah.

Mark Zandi:

No, just 2005. 2005, just to give you the sense of it. This is the record year, in terms of damage. 2005, including Katrina. Katrina was $200 billion. I'll put you out of your misery.

Adam Kamins:

$425-

Mark Zandi:

$365 billion. And that's in today's dollars, in 2021 dollars. Yeah. Here's another statistic for you, again, based on the Aon, this is a reinsure calculation. If you go back into the 80s, on average, typical year. Now, obviously, this goes up and down year-by-year, but on average, the damage from climatological and meteorological events was about $25 billion per anum. Right? In the last few years, last five years, again, it goes up and down and all around, it's $125 billion in today's dollars.

Mark Zandi:

So, that's a five-fold increase. GDP, over that same period is increased three-fold. So, that gives you a sense of things. So, to your point, Adam, I think we need to get prepared for more events, more costly events going forward, particularly if it gets into the northeast, where it's densely populated with a lot of highly-valued property and economic activity. That's going to be a significant problem for us going forward. Okay, so [crosstalk 00:50:11] Go ahead.

Ryan Sweet:

I think one thing to quickly point out, Adam's throwing around big numbers, like $50 billion lost property. That doesn't get counted in GDP. What will be counted is the rebuilding. So, you hear, "Well, we have GDP tracking 3.9%, but now we're losing $50 billion from the storm." That's not going to impact GDP.

Mark Zandi:

Yeah, and that brings up another point, this whole thinking that maybe natural disasters are a good thing because yeah, you have a bad day, but then you get all this money and you start rebuilding and it generates all this economic activity, and that's a good thing. So, maybe this is a good thing. I think that's the broken window fallacy. Is that right? Do I have that right? Yeah.

Ryan Sweet:

I think it's the other way around. The broken window fallacy says... It was a French economist that said if you go around breaking windows, you're not creating economic welfare, you're just creating economic activity, and that's why it's really important to make a distinction between economic activity, so rebuilding and rebuilding homes, bridges, roads, and economic welfare. Those in Louisiana that were hurt by Hurricane Ida, their economic welfare is damaged, but it will recoup, as we've seen after Katrina, super storm Sandy, all hurricanes, mostly those economies are made whole through insurance payouts or federal aid.

Mark Zandi:

Yeah, that's the fallacy. It's fallacious thinking.

Ryan Sweet:

Yes.

Mark Zandi:

That's not is a broken window kind of argument, but there's the broken window fallacies that that's kind of dumb. That's not right.

Ryan Sweet:

Right, and it always comes up when we have natural disasters.

Mark Zandi:

Yeah. So, what happens, just to make it clear to everybody, you have all this damage. Then, insurance money comes in, in many cases, government aid, at federal, state, local. So, you get all this money to rebuild and that generates a lot of jobs and economic activity, and that does show up, as you pointed out, in GDP, in jobs and incomes GDP, you see this pop in growth, and people say, "Oh, well, that's a good thing, right? So, what's the problem with the natural disaster?"

Mark Zandi:

The way I think about that though, the fallacy, is kind of an income balance sheet argument. So, that on the income side of the economy, you initially get hurt because you lose economic activity. The property damage is not relevant here on the income statement, but you lose the economic activity in the day two, three, week two, three that everyone can't get to work and power's out. You get the money and that generates economic activity, and you get that pop to growth, but at the end of that, your income statement is back to where it was, down, up and back to where it was.

Mark Zandi:

And in terms of your balance sheet, the assets that this economy has, I just suffered a huge loss from the physical damage, and maybe I can get back to where I was with a little bit of luck, if I've got a lot of insurance money coming in, if I got a lot of government aid coming in, but there's definitely no guarantee that's going to happen, that you're going to be made whole by all the sources of support that may come in, and that you're actually, at the end of the day, diminished by the natural disaster. Your economy has lower capital stock, public infrastructure's diminished, your private infrastructure's diminished, you have less productive capability going forward, and it could actually affect your long-term growth rates. Probably not because it's too small, but on the margin, that kind of impact.

Mark Zandi:

Is that how you think about it?

Ryan Sweet:

Yeah, and the one thing I would add is this is why rebuilding is really important, in the sense that you've got to do it the right way, and New Orleans did it the right way after Katrina. You're going to replace old bridges, old roads with new bridges, new roads, but they invested in the levies and that really paid dividends for Hurricane Ida. They didn't break like they did in Katrina. So, if you rebuild correctly, invest in improving the capital stock, then the long-term economic welfare could be a little bit better than it was before the hurricane.

Mark Zandi:

Yeah, and I think one other regularity I've noticed, this is just me eyeballing things. I'm curious whether this is consistent with what you've studied or in your intuition. If you go back 50, 75 years ago when you had a natural disaster, the amount of insurance money and government aid that came in fell well short of the actual physical damage that the economy suffered. But in recent years and decades, let's say over the last three, four decades, the amount of insurance money and government aid that comes in is almost equal to the amount of physical damage. And actually, the government response is calibrated to account for the insurance.

Mark Zandi:

So, if you're in an area where there's not a lot of insurance, New Orleans would be a good case in point, you get more government aid. If you get a lot of insurance, like northeast would be a good case in point, because of all the wealthy households and businesses, you get less government aid. But net-net, the amount of funding that's coming in is roughly equal to the damage. In your mind's eye, is that consistent with what you've observed and think?

Adam Kamins:

I think so. I think we've seen, generally, the federal government sparing little expense in some of these disasters and being very generous with aid towards areas that are hit. There have been times where I think it still has fallen short. I think if we look back to Hurricane Maria a few years ago, for example, in Puerto Rico, it fell very short there. There are times that I think it depends a little bit on the disaster. On the geography of the disaster, to your point, Sandy aid was not as great because there was wealthier population, higher levels of insurance, maybe the need wasn't as great. So, I think the total aid still fell a bit short. It depends a bit on the storm, but I think by and large, I agree with you.

Mark Zandi:

Yeah. Okay. Well, the one other point I wanted to make about this particular storm, Ida, any storm we suffer here in the near term, is that the rebuilding might be more prolonged and painful, and that's because there's no people to build, and we have these very severe supply chain disruptions, globally, and we can't get building materials. Right? You can't get everything from lumber to gypsum, to concrete, to steel, to you name it. People are having trouble getting it. So, this is particularly inopportune. And all those cars that are getting destroyed, that flooded out, I mean, good luck. You know? It's going to be pretty difficult to find a new car at this point. So, that's going to make Ida, the recovery from Ida, I think, longer and more painful, given the circumstances that we're in right now.

Mark Zandi:

Okay. Anything else we should be discussing here? I mean, Adam, you made a good point about you're going to be very busy going forward, it feels like, that because of climate change, we're going to have more events, more serious events. I will say, and I don't know if I've talked to you about this, but we're looking at this now globally, because we're doing climate change analysis all around the world, and so, we're going to keep track of storms and try to do the kind of analysis you do here in the U.S. everywhere else in the world. So, that complicated things. You know, a lot more going on everywhere else.

Mark Zandi:

So, obviously, keep that in mind. But are there any other things you want to say about this issue that we didn't cover or we should be thinking about?

Adam Kamins:

You know, maybe one short-term thing, I'll say, is that because of the pandemic, and because people are working from home more broadly, and even if people have gone back to the office, they've gotten more comfortable working from home, my techish youth today, not withstanding, it's less disruptive to have to stay home and to be unable to commute than it might have been even five years ago. Right? So, that's actually the lost output piece of this. So, I agree with you about rebuilding being more challenging right now, but I think the lost output associated with these storms, which does make its way into the GDP. There could be an opportunity to sort of overcome that a little bit more than in the past.

Adam Kamins:

So, the key variable that whether that happens or now is whether there are power outages. Right? So, if the power goes out, then you're out of luck and you can't work, regardless, but if you can't get back and forth, whether it's a snowstorm or a hurricane, but you're home and your power's on, you can actually do your job, if you typically work in an office type of setting. That does mitigate the hit a little bit.

Mark Zandi:

Yeah, no, that's a great point. That's a wonderful point. I mean, post-pandemic or because of the pandemic, many more of us are now able to work from home and to work more adeptly at home. So, that should help to mitigate some of the fallout here. That's a great point. Okay. Ryan, anything else on this subject, because, again, I know you've done a lot of work here as well. Any other thoughts on the economics of natural disasters that we should know?

Ryan Sweet:

Just that every natural disaster's different. Consumer behavior around snowstorms is different than hurricanes, for example. So, Adam, he has to adjust his methodology of how he calculates the economic cost based on the type of natural disaster, either a hurricane, snowstorm, wildfire. I don't think there's a natural disaster that we haven't tried to estimate the economic cost for yet.

Mark Zandi:

Yeah, very good. Yeah, good point. Yeah, you wrote a nice paper a few years ago that made that very clearly. It depends on the disaster. Okay. Well, I think we're going to call it a podcast. I do want to remind the listener to give us a rating. I haven't said that in a while, but we like to see those ratings and any feedback you have would be helpful. And also, we like to hear from you about future ideas for podcasts. So, you can go to economy.com, go to Inside Economics, right at the top of economy.com and vote on different subjects that you would like us to opine on, get guests for, and that would be very helpful as well. So, thank you for that, for your participating.

Mark Zandi:

So, with that, unless, Ryan, Adam, anything else to add? Okay, good? We're going to call this a podcast. Take care, everybody.