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Expert: Most flood loss likely permanent

July 21, 2008
Record flooding in early June won't spark an economic shot in the arm for Indiana like the typical rebuilding process that follows hurricanes and many other natural disasters, according to Richard DeKaser, senior vice president and chief economist at National City Bank.

That's because most of the damage was to agricultural crops, which cannot be rebuilt like houses and businesses.

In effect, much of the damage amounts to a write down that never will be recovered.

"There are some rebuilding efforts going on," DeKaser said. "But the greater impact is going to be the one-time and persistent effect on the year's crop."

Experts are still tallying the impact, but a recent blog posted by Federal Reserve Bank of Chicago economist Rick Mattoon said the 1993 flood appears to have been worse.

Flooding and the ongoing downturn in the recreational vehicle business caused Indiana employment to shrink 0.2 percent in June from a year earlier, according to the Indiana Department of Workforce Development. About 2.99 million were on the payroll.

The unemployment rate jumped half a percentage point to stand at 5.8 percent.

The Indianapolis area saw employment raise 0.5 percent in June from the same month last year. The increase to 929,000 jobs was driven by gains in construction, finance and hospitals.

The June figures are adjusted for seasonal variations and are preliminary, meaning they are subject to revision.

While low-lying areas in Columbus, Franklin and other cities were submerged, resulting in millions of dollars in damage, the impact on corn and soybean fields was wide-ranging. Many areas of drowned crops were replanted only to be inundated again by rains this month.

Crop damage will ripple to main street businesses and ultimately to companies in cities including Indianapolis, DeKaser said.

Last month's flooding came at a time many businesses were battening down hatches to survive the sluggish economy, he said. The flood gave them another reason to continue playing defense.

Indeed, the bank's monthly business confidence forecast shows Indiana businesses planning to hunker down even further.

In June, only 59.5 percent of Indiana businesses had a positive outlook, meaning 40.1 percent had a negative perspective. The June figure was a record low.

The positive rating slipped from 62.3 percent in May and nearly 65 percent in January.
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