Blizzard Economy Picks Some Winners and Losers
IN a post-blizzard economy, the business opportunities are somewhat out of the ordinary.
For individuals willing to shovel the four-foot drifts in New York, opportunity knocked as the city hired 800 to 900 workers at $7.87 per hour to clean snow out of crosswalks, bus stops, and catch-basins.
But the mammoth storm that hit the eastern US did not always bring the prospect of profit. Shutting down the three airports in the New York metropolitan area cost the Port Authority of New York and New Jersey revenue that it normally would have collected from the 3,000 flights that were canceled during one day.
Welcome to the wacky world of blizzard economics.
Although totaling up the impact of tons of flakes is an inexact science, economist David Wyss of DRI-McGraw Hill estimates the storm cost the US economy $5 billion to $10 billion in production - and about the same amount in retail sales. If business can't make up the losses, the storm could plow as much as 0.5 off the first quarter's gross domestic product (GDP), he estimates.
The potential also exists for the storm's impact to hurt the agriculture industry. The deep freeze extended as far south as Florida, where citrus growers are still checking their orange groves. Any losses are likely to result in higher prices on grocery-store shelves.
Other subtle costs to the economy don't show up as negatives in the GDP. For example, energy use by frozen residents jumped during the cold snap. As a result, natural gas prices have run up (See story, Page 9).
"It's a technical plus for the GDP, but it doesn't help your welfare," Mr. Wyss says.
Some stores have also been damaged, as roofs collapsed and frozen pipes burst. Low-lying areas experienced some flood damage.
Most economists expect the impact of the storm to be temporary.
"Most of these things can be offset by spending later," says Bob Dederick, a consulting economist with Northern Trust Company in Chicago.
For example, Mr. Dederick notes that the great freeze of the winter of 1993-94 did sap some economic vitality from the economy. Housing starts fell 17.6 percent in January. By February and March, however, the economy was back on track.
After the blizzard of '96, it will take days until malls and retailers can get their lots plowed. Some retailers have already lost several selling days. In New York, many chains, such as Today's Man and Brooks Brothers, did not open some stores the day after the storm.
"These things are very harmful. Snow is a very bad condition that keeps you out of the stores," says securities analyst Jay Meltzer, who publishes the Johnson Redbook Service, a publication of Lynch, Jones & Ryan, a brokerage house on Wall Street.
Mr. Meltzer notes that the snow hit retailers after they had a disappointing Christmas season. "They finished on a positive note and that trend has continued." But, he adds, "this kind of weather really clobbers you, and you don't make it up."
Because the snow is so deep, the cleanup will be costly to retailers. When the accumulation is more than six to 12 inches, "the fee is multiplied - almost quadrupled," says Larry Traub, a partner in G&S Investors, a New York-based shopping-center developer.
Food stores were filled with customers buying food and batteries before the storm. In Salisbury, N.C., for example, Food Lion Inc. reports its stores were busy with customers buying staples such as milk and bread.
"Even during the storm we had a steady stream of business from people buying things they forgot," says spokesman Chris Ahearn.
One of the first industries to feel the brunt of the snowstorm is the airline business. Airports up and down the East Coast were closed for two days. Delta Airlines, for example, canceled 1,528 flights. Some of those flights will not be taken, resulting in an economic loss. The airline also paid the hotel bills for any passengers who were stranded by the avalanche of white stuff.
"It's a big hit," says Bobby Harper, a spokesman for the airline, which estimated the loss in the millions of dollars.
But operators of cruise lines hoped to pick up business as snow-weary Northerners began to consider the psychological benefits of soaking their feet in the sand, not the snow.
"When things get back to normal, we expect to see a real big increase," says Aly Bello, an employee at Carnival Cruise Lines in Miami.
Airlines took a hit, but cruise lines are counting on winter-weary Northerners wanting to soak their feet in the sand, not the snow.