The Wall Street Journal reports on a J.P. Morgan Chase analysis showing that the oil spill choking off fishing and tourism dollars to the Gulf might actually raise GDP a smidge.
Underlining that gross domestic product measures are often not a good guide to an economy’s well being, the bank said in a research note its best guess is that the impact on the U.S. economy of BP’s Gulf Coast spill would be minimal.
“The spill clearly implies a lot of economic hardship in some locations, but given what we know today, the magnitude of these setbacks looks dwarfed by the scale of the US macroeconomy,” said chief U.S. economist Michael Feroli. If anything, he added, U.S. GDP could gain slightly from it.
The six-month moratorium on deep-water drilling may cut U.S. oil production by around 3% in 2011 and cost more than 3,000 jobs, according to J.P. Morgan’s energy analysts. Commercial fishing in the Gulf is also likely to suffer, but that’s only about 0.005% of U.S. GDP. The impact on tourism is the hardest to measure, although it’s fair to expect that many hotel workers who lose their jobs will find it hard to get new ones.
Still, cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said. The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion.
The J.P. Morgan analysts are right that the oil spill will have outsize impact on a few industries, impacts partially offset or even entirely replaced by new economic activity. Vacationers aren’t staying in those Louisiana hotels, but clean-up workers and lawyers and the National Guard are.
My concern is for the hangover. Five years from now, there won’t be anymore clean-up workers, and the federal government and BP won’t be funneling millions of dollars to the Gulf Coast. But my guess is that the fishing industry and the tourism industry will still be suffering from the impacts of the Deepwater Horizon disaster. How long until you would want to swim on one of those beaches, or eat one of those oysters?