Katrina could dampen real gross domestic product (GDP) growth in the second half of the year by 1Ž2 to 1 percentage point and reduce employment through the end of this year by about 400,000. Most economic forecasters had expected 3 percent to 4 percent growth during the second half, and employment growth of 150,000 to 200,000 per month. Economic growth and employment are likely to rebound during the first half of 2006 as rebuilding accelerates.
The Congress has appropriated $10.5 billion for spending on emergency relief, and many analysts expect more to be provided in the near future. Katrina will affect the budget in a number of ways in addition to the emergency spending-outlays may be affected by disruptions in the submission or processing of claims for federal payments, reductions in royalty payments from oil and gas drilling, and the sale of oil from the Strategic Petroleum Reserve; and tax receipts will be affected by immediate reductions in national income and gasoline consumption, along with temporary tax relief provided by the Internal Revenue Service-but it is still too soon to estimate what the net effects on the budget might be.
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