The CBO said the insured and uninsured damage to homes, business and other property will likely be less than the high of 140 billion dollars estimated by the economic firm Risk Management Solutions but would still be the costliest natural disaster in recent US history.

The overall economic impact of the storm, however, is likely to be felt only for a few months before recovery in the fourth quarter of this year, CBO director Douglas Holtz-Eakin told the House of Representatives Budget Committee.

Holtz-Eakin said the two storms probably wiped out between 293,000 and 480,000 jobs in the region and that total economic output may be cut by one to 1.5 percentage points in the third quarter. But he said recovery would likely be swift.

"As cleanup and repair begin, the economy in the fourth quarter is likely to grow at a rate not much different from what it would have been without the hurricanes and possibly even a little higher," he said in his prepared remarks.

"Real GDP growth for the two quarters together -- that is, for the second half of 2005 as a whole -- is likely to be dampened by about half a percentage point. By the first quarter of 2006, though, spending to repair or replace the capital stock (homes, business structures, and equipment) is likely to drive the level of output back roughly to its previous trend and to continue to add slightly to growth during the rest of that year."

A similar story is likely in the employment picture, he said.

"By early next year, the pace of reconstruction will probably cause the net effect of the hurricanes on jobs nationwide to be minimal," he stated.

"If, as appears likely, output bounces back by early next year to equal or exceed its previous trend, total employment will be similar to what it would have been if the hurricanes had not occurred, even though some of the people who lost jobs may remain unemployed for some time."

Inflation will also pick up by as much as one percentage point in the second half of this year as a result of the storms, primarily because of the increase in energy prices, CBO said.

"However, inflation should revert to pre-Katrina rates in the first half of 2006, provided -- as most analysts anticipate -- energy prices ease and drop part of the way back to their levels before the hurricane."

As for property damage, CBO said it expects the damage to homes and other residences to be between 17 billion and 33 billion dollars, based on an assumption that about 300,000 units were damaged.

The energy sector sustained losses likely to be between 18 billion and 31 billion dollars. The remainder of the losses were sustained by other businesses and to government infrastructure.

"The combined losses of Hurricanes Katrina and Rita are likely to surpass those from the costliest hurricane previously on record (Andrew) and the three costliest disasters in recent history (Hurricane Andrew, the September 2001 terrorist attacks, and the Northridge earthquake)," CBO said.

"The extent of the damage done by the two recent hurricanes suggests that recovery will also take longer than the recoveries from those other large catastrophes."

related report
Chaos at 'back to business' forum for New Orleans firms, job seekers
by Glenn Chapman
New Orleans, Louisiana (AFP) Oct 06 - A "Back to Business" workshop in New Orleans verged on anarchy Thursday as business owners mobbed government representatives and raged about being shut out of rebuilding contracts.

"I don't care what you say, Washington does not get it," one man shouted as order broke down among local business people who crowded into a hotel ballroom to meet with government officials and major contractors. "We are bleeding down here. We are dying on the vine."

What was intended to be a question-and-answer session at the start of the daylong event erupted into a litany of passionate complaints about local contractors and workers being shut out of big-money rebuilding jobs.

Only 30 percent of the government contracts awarded to date for reviving New Orleans and its environs have gone to local companies, said Louisiana Secretary of Economic Development Michael Olivier, who was on the panel.

"That is exactly why we are here today," panelist Alfonso Martinez Fonts of the US Department of Homeland Security told furious local contractors who refused to let the panelist take a morning break. "That is exactly what we've been hearing."

Unsatisfied contractors laid siege to the platform where the panelists sat and demanded to know why major corporations such as Halliburton and Bechtel had been awarded huge rebuilding contracts while they were left begging.

Private security guards were called in to prevent people from getting onto the platform with the speakers.

"We won't be able to help you if it becomes a free-for-all," moderator Garland Robinette said into a microphone while pleading for people to calm down.

Tensions gradually subsided and livid contractors retreated to hallways to fill out forms and discuss concerns with each other.

"We were resting from running, and they were giving away contracts to people from other places," said Derrick Vernado, a 28-year-old contractor who fled from his Ninth Ward home as Hurricane Katrina bore down on New Orleans.

"If it keeps up after all the people get here, it's not going to be a pretty sight."

Many evacuees arrived home to find their homes destroyed and rebuilding jobs given to outsiders, said Kevin Boutte, who returned Sunday to find his house destroyed but got work repairing a hotel.

"If you don't have a job, how you going to rebuild," Boutte said. "It's going to get crazy when people don't have a job and a place to stay. You'll see more killing, more robbery."

Even if local contractors, construction workers and unskilled laborers find jobs rebuilding, professionals such as dentists and lawyers will have to struggle, said Adrienne LaCour, a New Orleans lawyer.

Lawyers have been left without clients and dentists without patients, LaCour said.

"My clients are in shelters around the country," said LaCour, who planned to fall back on a nursing career to find work. "I have four college degrees. How can I become homeless and unemployed in one day?"

The 51-year-old woman put her intact home in New Orleans up for sale and moved into a mobile home she bought with her brother, also a lawyer, in Baton Rouge.

"It is all about flexibility, using whatever skills you have and trying to parlay that into whatever you can do for income," LaCour said. "In time, the city will come back, but you have to survive until that time comes."

New Orleans lost a healthy portion of its tax base along with parts of the city once made up of working professionals, LaCour said.

"If those people cannot come back, it will be a dead zone," LaCour warned.

Days earlier, Mayor Ray Nagin had announced plans to lay off about half of the city's non-essential employees because the tax base was in shambles.

"The city is broke and I'm sure some of you businesses are feeling the same angst," Don Hutchinson of the New Orleans office of economic development told those gathered at the forum.

Hundreds of New Orleans companies and job seekers whose worlds were devastated by hurricanes Katrina and Rita showed up for the workshop held to discuss the business of rebuilding the city.

"We need to ride the wave of rebuilding the city," said Stephen Orkus of Armstrong's Supply Company, an 80-year-old New Orleans electrical supply business that lost 800,000 dollars' worth of inventory when flooding destroyed its electrical parts warehouse.

"I've been at the end of a chain saw for 21 days," said Jay Fox of Bayou Tree, the arborist firm that cared for city and university trees prior to the storms. "There is no more shade in New Orleans."

Local business owners at the event expressed concerns that outside companies with clout and local firms with political connections were "lining up at the trough" for bites of the billions of dollars to be spent resurrecting the area.

Those who showed up for the workshop were asked to fill out a form registering with the US Department of Commerce and answer survey questions about how the hurricanes affected their businesses.

"I lost everything, but I'm back to work," Boutte said. "I'd like to see the Sheetrock guy down the street working, the nurse down the street working."

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