Sandy Recovery: Significant multiplier or short-term pop?

From Bloomberg:

Sandy Recovery Spurs Hiring From Furniture to Plumbing

The first customers Michael Guarino saw after superstorm Sandy asked to cancel orders for furniture no longer needed in their damaged homes, threatening the survival of a business his family opened three generations ago.

Then came a different set of clients. Two weeks after Sandy made landfall Oct. 29, Guarino, owner of Michael’s Furniture in Brick, New Jersey, began what’s turned into more than a month of 80-hour work weeks to serve residents re-stocking their houses.

“I can’t even keep up with it,” Guarino, 50, said of the post-storm demand. His business added two more delivery trucks and a warehouse. He expanded the staff to 27 from 15, with plans to hire more, even as Guarino said it’s “very difficult” to find local workers while residents are consumed with clean-up efforts.

Furniture dealers are among the businesses seeing a boom in orders as consumers in the Northeast recover from the worst Atlantic storm on record. The disaster that killed more than 100 people in 10 states, wreaked billions of dollars in damage and forced the first two-day shutdown of U.S. stock trading for weather since 1888 is also providing unexpected opportunities for companies assisting in the rebuilding and the employees they’ve hired to help.

Construction, plumbing, sand supply, tree removal, road repair and structural engineering are among services spread thin.

Sandy has probably increased the demand for construction workers by at least an additional 30,000, said Bernard Baumohl, chief global economist at Economic Outlook Group LLC, a Princeton, New Jersey-based forecasting firm.

The economic boost of post-storm reconstruction probably will occur over the next year or two, and Baumohl said he expects “a real big, V-shaped rebound” in construction over the next six to 12 months.

“We’re going to see a significant multiplier effect with all these jobs that are going to be generating income for these workers, which are then going to spend that additional income in the economy,” Baumohl said. The rebuilding effort could add 0.4 percentage points to U.S. growth in 2013, he said.

Recovery from a natural disaster takes years, said Michael Lahr, associate research professor at Rutgers University’s Center for Urban Policy Research in New Brunswick, New Jersey. Yet, New Jersey’s coastal companies are seasonal and probably will recover more quickly since vacationers will return, compared with New Orleans businesses, which suffered after the city lost half its population in the year after Katrina.

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51 Responses to Sandy Recovery: Significant multiplier or short-term pop?

  1. grim says:

    From the WSJ:

    Tenants Feel Pinch of Rising Rents

    Record-low mortgage rates mean that homeowners have a smaller financial burden for their residences than at any time since the early 1980s.

    But here’s the bad news: Rising rents are squeezing many families and leaving them with less to spend.

    Several factors have pushed rents up. Rental and apartment housing is in short supply but demand has grown after several years of foreclosures and population growth.

    Housing-market turmoil has many potential owners wary of buying real estate. And for many aspiring buyers, qualifying for a mortgage is tough, keeping prospective owners in rentals for longer and locking out those with incomes or credit scores bruised by job loss or foreclosure.

    Across the U.S., “effective” monthly rent—which means the final amount paid including discounts—averaged $1,044 in October, up 3.7% from a year ago, according to Reis Inc., a real-estate data firm. Landlords no longer have to “pony up in order to entice tenants,” said Victor Calanog, Reis’s chief economist. He added that rising vacancies suggest rents are “approaching equilibrium,” but aren’t likely to fall soon.

    The rising cost of renting is putting pressure on tenants at a time when many are still grappling with slow or falling income growth. In the third quarter, renters spent 24.12% of their disposable income on financial obligations—things such as rent, debts and auto leases. That was the highest level since early 2010, according to the Federal Reserve.

    This contrasts with living costs for homeowners, which have fallen steadily in recent years amid record low interest rates. During the third quarter, homeowners, including those who don’t have mortgages, spent 13.9% of their disposable income on financial obligations, the lowest share since 1984, according to the Federal Reserve.

  2. Ernest Money says:

    It all works until it doesn’t

  3. grim says:

    Also from the WSJ:

    Home Prices Hit a Milestone

    Home prices are on track to notch their first yearly gain since 2006, the strongest performance since the housing bust and a development that could accelerate the real-estate rebound even as the broader economy stutters.

    “The tide has changed,” said Ivy Zelman, chief executive of research firm Zelman & Associates. “People feel it’s OK to go back into residential real estate—it’s no longer taboo—and that change in sentiment could have a very powerful effect.”

    Prices have risen this year amid stronger demand and sharp declines in the number of homes for sale. Banks slowed down foreclosures after abuses in processing paperwork surfaced two years ago. Since then, banks have become more aggressive at modifying loans or approving short sales, where the home is sold for less than the amount owed. The decline in new foreclosures has reduced the number of homes on the market that sell for large discounts.

    Homeowners who normally would sell their properties have been holding them off the market rather than sell at what they perceive to be a lowball prices, leaving inventories of previously owned homes at an 11-year low.

    Demand, meanwhile, has picked up, first as investors scooped up perceived discounts on properties that can be rented out or resold quickly for a profit. Traditional buyers—those planning to live in the property and not flip it—also returned to the market, drawn by record-low mortgage rates, rising rents and steady job gains that are increasing household formation.

    “People got tired of living in mom and dad’s basement, and rents have gotten much higher than your mortgage payment,” said Glenn Kelman, chief executive of Redfin, a real-estate brokerage.

  4. grim says:

    Jobless claims fall to 350k, but it appears that a large number of individual state estimates figured into the calculation, which could be distorting the number. However, the less volatile 4-week average is down to 356k.

  5. Mike says:

    Good Morning New Jersey

  6. grim says:

    Looks like initial claims will be finishing off 2012 at the lowest levels of the year, from CR:

    Weekly Initial Unemployment Claims decline to 350,000, 4-Week average at low for 2012

  7. BearsFan says:

    The Perception Management economic policy in this country is extremely effective.

  8. 250K says:

    Federal extensions of Unemployment benefits are coming to an end across the country. As the extensions wind down, 26 weeks goes back to being the norm.

    Unemployment numbers will continue to get a positive outlook boost as more and more people fall into the ranks of “I Give Up”.

  9. grim says:

    Anecdotal, so it’s crap, but I’ll mention it anyway.

    A company I’m very familiar with, and know a number of employees there, went through a big round of layoffs during the recession. They were heavy in administrative staff, lots of folks were long-timers, lots of non-primary earners. I’d say the majority of the folks laid off worked because they had a job, not because they needed the money. Lots of folks near retirement or had spouses already in retirement.

    Anyway, they all became 99ers, and to them it was basically free money, they never intended to go back to work. One person in particular made it a point to routinely brag about how he was laid off just in time to spend his summer at the shore and get paid for it. Most of these folks got at least decent packages, it was the happiest round of layoffs I’d ever seen. They all still get together monthly for their ‘lunch club’ get-togethers.

    So, the question is, how many of these 99ers are 99ers because it’s there? How many will get off their asses and back to work when the benefits are gone?

    I’m not saying the roles are packed full of abusers, but don’t discount the percentage.

  10. Ernest Money says:

    About to reach our Thelma & Louise moment.

  11. chicagofinance says:

    not crap…..too common….my reach is farther across more groups….

    grim says:
    December 27, 2012 at 9:26 am
    Anecdotal, so it’s crap, but I’ll mention it anyway.

    A company I’m very familiar with, and know a number of employees there, went through a big round of layoffs during the recession. They were heavy in administrative staff, lots of folks were long-timers, lots of non-primary earners. I’d say the majority of the folks laid off worked because they had a job, not because they needed the money. Lots of folks near retirement or had spouses already in retirement.

    Anyway, they all became 99ers, and to them it was basically free money, they never intended to go back to work. One person in particular made it a point to routinely brag about how he was laid off just in time to spend his summer at the shore and get paid for it. Most of these folks got at least decent packages, it was the happiest round of layoffs I’d ever seen. They all still get together monthly for their ‘lunch club’ get-togethers.

    So, the question is, how many of these 99ers are 99ers because it’s there? How many will get off their asses and back to work when the benefits are gone?

    I’m not saying the roles are packed full of abusers, but don’t discount the percentage.

  12. Tiny Violin says:

    Re 10. More than we want to know. Friends in finance used to call the (restricted) time between companies a “gardening sabbatical”. Taking whatever incentives and packages between jobs as icing on the cake. Now it’s a lifestyle and they take more and more time in-between without conscience.

  13. grim says:

    From Bloomberg:

    Sales of New U.S. Homes Increased in November to Two-Year High

    Sales of new houses rose in November to the highest level in more than two years, the latest sign that the real-estate market is helping lift the U.S. economy.

    Purchases climbed 4.4 percent to a 377,000 annual pace, the most since April 2010, following a revised 361,000 rate in October, the Commerce Department reported today in Washington. The median estimate of 71 economists surveyed by Bloomberg called for sales to increase to 380,000.

    “There are more sales, more construction, more house-price gains,” Mark Zandi, chief economist at Moody’s analytics Inc. in West Chester, Pennsylvania, said before the report. “The economics of owning a home are very good.”

  14. The Original NJ ExPat says:

    [9] 250K – I’ve long understood the sham of the “I Give Up” crowd as not being part of the workforce, so they are not “unemployed”, they are just without income, but I never thought about the other side of the coin. Is someone officially part of the workforce and officially unemployed as long as they are hammering an unemployment check? Or are the numbers skewed because you have to pay lip service to “looking for a job” while you collect your 99 weeks so you are counted as unemployed and looking for a job even though you might not be.

    Federal extensions of Unemployment benefits are coming to an end across the country. As the extensions wind down, 26 weeks goes back to being the norm.

    Unemployment numbers will continue to get a positive outlook boost as more and more people fall into the ranks of “I Give Up”.

  15. grim says:

    Battered by Sandy, Moonachie government to operate out of trailers starting in January

    Wouldn’t it be easier to simply merge Moonachie with a neighboring town at this point? Why bother incurring the cost for trailers or to rebuild municipal infrastructure.

    Let’s just re-merge Teterboro, Moonachie, and Lodi back to their original state.

  16. Ernest Money says:

    No jobs. No future. Only misery. Dead ahead.

  17. yome says:

    It is a fact that after 2 years of not being employed or longer chances of getting a job is slim specially with high unemployment. To not look for a job with in the 99 weeks tells me you dont need a job. To base this to the rest of the population that need a job and cant find one and cheer that their benefits is ending is cruel.

  18. joyce says:

    Obama a wolf

  19. joyce says:

    Oliver Stone:
    Obama a wolf in sheep’s clothing
    http://www.youtube.com/watch?v=R2kpyYWd0eo&feature=youtu.be

  20. Juice Box says:

    If going over the cliff means a 2% tax hike and Spending cuts that would cut the deficit in half, then so be it. Kicking the can into the next recession is not going to spur any growth. It is time to retool and rebuild our economy since the current deficit funding gimmicks are only going to make this cliff seem like gentle bunny slope.

  21. yome says:

    Going over the cliff just means debates who is getting their taxes cuts instead of debates who is getting their taxes raised before the cliff. There will be no long term effect as long as they get a deal before the accounting magic on the budget runs out. AMT and others can be reversed on a deal.

  22. Ragnar says:

    Regarding the fiscal cliff. I’m willing to pay 5% higher federal taxes as long as I know that the bamaphone lady has that phone and food stamps ripped from her clutches. And as long as the government admits that they are not “asking” me to pay “a little more” but rather they are “forcing” me to pay “a lot more” and that I am now paying “more than my fair share,” namely, over 50% of my income between federal and state, a higher percentage than 99.5% of the population.

  23. Ragnar says:

    Here’s a good summary about what’s really going on with the “fiscal cliff”:
    http://johnhcochrane.blogspot.com/2012/12/fiscal-cliff-or-fiscal-molehill.html#more

    Here is the big issue. The US has already enacted European welfare and regulatory state with American characterstics — the bloated inefficiency, legalism, and red tape that is our specialty. We have not enacted the taxes to pay for it. We will either dramatically cut back the former, or rather dramatically raise the latter. On the table now is at most $100 billion out of a $1 trillion deficit, and likely much less. The fiscal molehill.

    US Federal, State and Local spending is 40% of GDP. Pay attention to state and local, that’s a lot more than the 24% Federal we talk about a lot. Europe is more like 50% of GDP, so it sounds like we’re behind. But our government is bigger than it looks.

    We have about a trillion dollars of “tax expenditures,” including the deduction for employer-provided health insurance, deduction for mortgage interest, and (small but annoying) credits for all sorts of things like checks to silicon valley CEOs too subsidize the electric cars they drive down t their private jets. These are no different than a trillion dollars of tax and another trillion dollars of spending, or another 6% of GDP. We’re at 46% right here.

  24. Juice Box says:

    Ragnar – the 40 million collecting food stamps is a blip on the budget.

  25. Ben says:

    It is a fact that after 2 years of not being employed or longer chances of getting a job is slim specially with high unemployment. To not look for a job with in the 99 weeks tells me you dont need a job. To base this to the rest of the population that need a job and cant find one and cheer that their benefits is ending is cruel.

    I wouldn’t operate on the idea that the rest of the population ever thinks long term. I’ve talked to plenty of late 20s early 30s people who were on unemployment who basically said “why should I work for 40k? I’m not going to work 40 hours a week to get $100 more than I’m already getting”.

  26. Anon E. Moose says:

    Ragner [25];

    +1. Anytime some neo-socialist tells me how essential this or that government spending program is — take Obamacare for example — if Obamacare is so important, then why can’t its primary beneficiaries be asked to ‘sacrifice’ some minor token contribution, say the price of one pack of smokes, towards its provision? Even under a flat tax, the net dollar increase on the ’47%’ from any of the government spending pales in comparison to the cost of providing the bennies, but at least make a token contribution.

    Damn, I wish John Roberts hadn’t blinked. Ironic that it was another Roberts on the Court who provided the “Switch in time” to “Save the Nine”.

  27. HouseWhineWine says:

    There is no reason why an able-bodied person, with a means of transportation, can’t be required to provide some kind of community service. In fact, I don’t know how their conscience allows them NOT to do something for their UI paycheck here in N.J. I speak from experience, having been on 2 short cycles of unemployment during this recession. I should not be tooting my own horn, but i spent hours out in the community and, in the end, it really benefited me too. UI can become a crutch, and that’ s really bad for everyone.

  28. 250K says:

    Ben (28)
    >> I’ve talked to plenty of late 20s early 30s people who were on unemployment who basically said “why should I work for 40k? I’m not going to work 40 hours a week to get $100 more than I’m already getting”.

    What state are they collecting in? If you are in NY or live in NJ but worked in NY before collecting unemployment, you max out at $405 a week or $21k a year and thats before taxes are taken out. Even in NJ you max out at $611 a week pre-tax so $31.7k. I don’t think anyone would consider that enough to live on whether you reside in East Orange or Livingston.

    HouseWhine (30) – In your scenario, will the state also fund the childcare costs for those who can no longer pay for daycare/babysitter but are required to perform community service?

  29. Ernest Money says:

    Nobody gets it. The whole point of UI bennies is to get people hooked on the gubmint teat and sitting around watching Dr. Phil every day while their brains and bodies turn to goo.

  30. Ernest Money says:

    Storm troopers of the stupefied.

  31. Ernest Money says:

    Look at these rictus-faced dolts go at it on CNBC.

  32. Anon E. Moose says:

    Title Post;

    How many times does “Broken Windows” have to be disproven? I feel like it will take a wooden stake through its heart. They may be good for the glazier, but only at the expense of the butcher. Bastiat put this down what should have been for good over 160 years ago.

  33. yome says:

    The other side of that coin is nobody hires long term unemployed

    “I’ve talked to plenty of late 20s early 30s people who were on unemployment who basically said “why should I work for 40k? I’m not going to work 40 hours a week to get $100 more than I’m already getting”.

  34. chicagofinance says:

    Isn’t that the point? …..you are saving people from themselves…..

    yome says:
    December 27, 2012 at 4:02 pm
    The other side of that coin is nobody hires long term unemployed

  35. The Original NJ ExPat says:

    [36] This is a broad generalization, but doesn’t apply broadly. In IT, for example, one can use time away from work to get beyond current, acquire additional skills that are in short supply in the marketplace. I did this in my 20′s, 30′s, and 40′s. I could do it again now if need be. The way I see it is that you have the disadvantage of being married to your company’s technologies while you’re working. You have no such limitation while you’re not working. Now, with the internet, it’s even easier to inexpensively train yourself on a new technology and then get hired doing it if the market is short on those skills.

    The other side of that coin is nobody hires long term unemployed

  36. chicagofinance says:

    clot: What was that tequila recommendation from several months ago? Was it Siete Leguas? I didn’t think so……

  37. Comrade Nom Deplume in the packed powder says:

    I see dope is living up to his namesake. I’d reply but I don’t argue with opinion.

    NJ is known for a lot of things and one is good pizza. They really need someone from jersey out here. The wife patronized Park City Pizza Co here and it sucks. Overpriced, late, awful pizza. I actually considered it inedible.

    If I knew how to make decent NJ/NY pizza, I’d retire here and open a pizza joint.

  38. Juice Box says:

    Re: #40 Nom – the cartel of mutz and sauce makers that keep NY metro consistent don’t deliver in fly over, you won’t be able to duplicate the dough either since the altitude affects the crust.

  39. relo says:

    40 & 41: Maybe not there in particular, but I’ve told my Sicilian wife that opening a pizza joint somewhere else is our second act. After all, it’s for the children.

    Her Uncle did it with bread in the southwest with bread and it seemed to work out ok.

  40. relo says:

    To be clear, when I say “told my wife” I mean that I inquired in a genteel fashion if it would be something she would consider.

  41. cobbler says:

    Bad pizza seems to be an acquired taste. Once in Houston area I got 3 pies for the local crew from one of the very few decent pizzerias over there, and the guys didn’t like the stuff to the extent of asking me to buy from Pizza Hut the next time I want to spend money.

  42. Fabius Maximus says:

    You see, it was all above board …:*)

    http://mobile.politico.com/story.cfm?id=85543&cat=topnews

  43. NJGator says:

    How greed and politics nearly destroyed the coast
    Countless homes and businesses could have been saved by better dune and flood protection – if not for the people, and government, that fought against them.

    The beachfront’s devastation was years in the making, fueled by greed, elitism and self-interests that left much of the area ill-prepared for the blow from superstorm Sandy.

    Significant parts of the shoreline in Ocean and Monmouth counties were left vulnerable — despite more than a decade of warnings from experts, residents and some local officials.

    Life-saving protection, which covers 24 of the 50 miles of largely developed oceanfront in the two counties, was stalled in many areas by defiant beachfront and business owners, multiple local governments and a fractured shore-protection system that allowed hundreds, perhaps thousands, of individuals to decide how, when, where, and even if, beaches and dunes should be built.

    With Congress and the White House mulling the $37 billion Gov. Chris Christie has requested to rebuild New Jersey, little has been discussed on how to prevent damage from the next Sandy.

    The state has yet to make public a detailed list of where the money would go. Just one line in its request points to the state’s future: $7.4 billion for “Additional mitigation and prevention costs.”

    At the root of New Jersey’s disconnected approach to shore protection is the state’s traditional home rule. For decades, local politics have trumped statewide initiatives simply because of their numbers: 566 municipalities, 585 school districts and 21 counties, each dependent on local property tax money for survival.

    The toll of this disarray?

    Houses tossed across the sand like toys; whole communities burned to the ground from natural gas-line leaks; businesses abandoned; thousands of residents displaced for weeks, if not months.

    http://www.app.com/article/20121223/INSIDE/312230044/How-greed-and-politics-nearly-destroyed-the-coast

  44. Juice Box says:

    Re: relo – spent a stint working in high school at a restaurant/deli owned by a hothead excon Sicilian and a Guy from Napoli that would only drive Fiats. Mutz, sauce, and dough including the stone used to cook the pizza are very hard to replicate outside of the Northeast. Nobody west of Philly made a pizza like I had the pleasure of doing especially the pies covered with authentice toppings that cost a fortune in the 1980s.

    I have be been all over Italy and the US and there are few place for pizza like NY Metro.

  45. AG says:

    I will live at the Jersey Shore in 3 feet of water so long as I dont have to live next to 3 thousand Christ killers north of the Driscoll bridge where I can taste the air.

    How is that for your PC smack in the face f_cktards?

  46. Ernest Money says:

    chi (39)-

    I like Siete Leguas, although Fortaleza is a new favorite.

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