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Weathering Katrina's punch

Even as the costs of the nation's most expensive storm are added up, it's becoming more and more apparent that the economy has weathered Hurricane Katrina relatively well.

The government reported Friday that payrolls fell by 35,000 last month as people were displaced and businesses shuttered by the storm. While that was the first decline in payrolls in more than two years, it was a far lower number than the 150,000 or so economists had forecast.

Insured losses from Katrina are estimated at around $35 billion, a number expected to rise as more claims roll in. And forecasting firms put the total economic costs, including losses that weren't insured, at $100 billion or more.

While gasoline is falling at the pump, higher natural gas and heating oil prices this winter could hurt consumer spending in coming months.

And hundreds of thousands of families and small businesses along the Gulf Coast are facing a financial crisis despite promises of assistance, which could plunge thousands of middle-class families into bankruptcy.

Yet despite these shocks to the system, economists say the nation's economy should keep growing solidly.

The Federal Reserve appears on course to continue its path of regular quarter-percentage point interest rate hikes, as Fed officials have made clear in comments this week that they see a greater threat from inflation than from a possible economic slowdown.

The main reason the economy has mostly shaken off Katrina: its underlying strength ahead of the storm.

"There are times when the economy is resilient," said Anirvan Banerji, director of research for the Economic Cycle Research Institute. "In all of the shocks where recession resulted, it's like things were lined up like dominos -- you knock one down and they all come down. This is not one of those times..."