The CBO report said that Katrina's impact was likely to be "significant but not overwhelming" to the overall U.S. economy, especially if energy production along the Gulf Coast returns to pre-hurricane levels quickly.
"Last week, it appeared that larger economic impacts might occur, but despite continued uncertainty, progress in opening refineries and restarting pipelines now makes those larger impacts less likely," CBO Director Douglas Holtz-Eakin said in a letter to congressional leaders.
Meanwhile, Senate Finance Committee Chairman Charles Grassley, R-Iowa, said unemployment might have to be beefed up because of Katrina.
"We've got to make sure that the unemployment program has enough flexibility in it to make sure that the people who apply for it are going to get the benefits, and I suppose maybe at some point look if there needs to be any extension," Grassley said.
Other lawmakers are scrambling to find things they can do to help and are looking at issues ranging from special tax breaks to changing Medicare and Medicaid rules to providing emergency help for school districts taking in kids from the affected area, reports CBS News Correspondent Bob Fuss.
The CBO assessment was in line with the predicted impact of Katrina being made by many private forecasters, who have also cautioned that the effects could be much worse if rising energy prices cause consumers to cut back on their spending.
The CBO report said that it expected economic growth in the second half of the year would be reduced by between 0.5 percentage point and 1 percentage point. It put total job losses at around 400,000.
CBO, the nonpartisan agency that provides economic and budget advice to Congress, said before Katrina struck the expectations were that the economy would grow at an annual rate of between 3 percent and 4 percent in the second half of the year with employment growing by 150,000 to 200,000 workers per month.