Companies busy with hurricane orders

The economy may take a hit from Katrina and Rita this year, but in 2006, GDP figures are likely to rise.

Jason Lippert sounds as if he hasn't slept in days. Indeed, sleep has been tough to come by: His factory in Goshen, Ind., is expanding shifts and hiring workers - and still it's just barely able to keep up with the orders.

"It's very hard to get people around here," mumbles Mr. Lippert, CEO of Lippert Components Inc., which supplies parts to the manufactured home industry.

The busy times at Goshen are the result of the hurricane recovery effort, whose ramping up will provide stimulus to the US economy. Across the country, manufacturers of welding machines, two-by-fours, and aluminum sheeting are working hard to meet demand. Recruiters are trying to find people to staff Red Cross and FEMA call centers. And in New Orleans itself, service providers are hiring chefs, pest specialists, and anyone who wants to clean portable toilets. "We will potentially have five times the GDP of New Orleans pumped into the economy," says economist Anthony Chan of JPMorgan Asset Management in Columbus, Ohio.

The actual impact of all the activity will show up in economic statistics next year, analysts believe. And before that, the statistics may run the other direction: In the wake of the hurricanes, refineries, chemical plants, and many businesses shut down, which will reduce the third-quarter gross domestic product by 0.3 percent and the fourth-quarter GDP by 0.4 percent, estimates Mr. Chan. But next year, "the recovery dividend will kick in," says Chan. In fact, he estimates that the impact on GDP next year could be twice as large as this year's losses.

The bounce will come at a time when many economists had expected the US economy to be slowing. They had anticipated that a slower housing market, combined with the effect of high energy prices and rising interest rates, would hold US economic growth in 2006 to 3 percent or less. Now, some economists are bumping up their estimates for the first half - perhaps by as much as 1.5 percent. "The recovery spending will keep the economy humming at a time when it would otherwise be slowing down," says Mark Zandi, chief economist at Economy.com. "It's one of the reasons why the Fed tightened [rates] a few weeks ago: They know the rebuilding will soon begin and help stimulate the economy later in the year and early next."

For some companies, the work is coming at a welcome time. That's the case with Fleetwood Enterprises, which is working on a $170 million contract with the Federal Emergency Management Agency to supply 10,500 travel-trailers and 3,000 manufactured homes - all to be delivered before the end of the year. "This is normally the time when our production rates slow down and we would be cutting back," says Elden Smith, president of the company in Riverside, Calif.

Fleetwood is building the temporary homes in 23 of its 41 plants. To complete the order, the company has extended shifts and is working six days a week. It has also hired an additional 1,000 workers.

Many companies are keen to fill FEMA orders since the government pays promptly and executives know the product is probably needed immediately. "When FEMA places an order, you drop all other things you're doing and do all you can to get it out the door," says Leigh Abrams, CEO of Drew Industries, a firm in White Plains, N.Y., that owns Lippert.

With all the activity, some areas are experiencing a phenomenon not seen in a while: job hopping. In Goshen, the job market is so hot that workers can get higher pay. "It negatively impacts [businesses that] are losing employees to the RV industry," says David Daugherty, president of the Goshen Chamber of Commerce. But he adds, "We have a pretty tight job market here, and most industry is running pretty strong."

At the moment, many workers are too tired to buy new cars or plan trips for a later date. But Mr. Daugherty expects the additional income will come back to the community, perhaps during the holidays: "People will maybe buy some new furniture or a car, or plan a vacation."

Another effect of the scramble to rebuild: Some prices may be going up. Mr. Abrams says his companies are busy buying steel, aluminum, vinyl, and glass, not to mention screws and bolts. "We're probably paying too much for it, but we've had to build inventory quickly," he says.

Some of the new jobs will benefit people in the hurricane-ravaged areas. For example, VT Griffin, a civil contractor, received a contract to operate a tent-city camp at a naval air station in New Orleans. Griffin will provide 6,000 US Marines, Navy Seabees, and contractors with meals, waste management, pest control, and electricity. Within a week, it expects to have hired 150 people, mostly from the local area.

"With the multiplier effect, it could pump $20 [million] to $30 million directly and indirectly into the local economy," says Paul Mangano, senior vice president of the Atlanta-based company. "For example, we've subcontracted with a local organization, the St. Tammany Association for Retarded Citizens, to do all the laundry."

Yet other companies are hiring workers who can field phone calls from those in need. For example, Spherion Corp., a national staffing and recruiting company, is trying to fill 500 jobs for a FEMA call center in Orlando, Fla. In the first two days, it received 5,000 calls from job applicants.

"We're looking for people who understand how to operate a computer, have good listening skills, and [know] how to get answers," says Richard Lamond of the company, which is based in Fort Lauderdale, Fla. "If people have relocated from New Orleans, we are talking to them as well."