How the 2017 Hurricane Season is Affecting Our Economy
The recent devastating storms that have hit various parts of the United States have had dramatic and catastrophic human impact. The economic impact of these storms and the destruction they brought with them can be far-reaching as well, and the significance of that impact nationally varies from one storm to the next. There are usually some large numbers thrown around after a major storm framed as the total cost to rebuild, but these are only part of the big economic picture that starts to take shape as an affected area begins the process of returning to normal life.
Harvey in Texas
Predictions for the total cost of the destruction wreaked by Hurricane Harvey in Houston and the surrounding areas ranges all the way up to $190 billion, which would make it the most costly storm in US history. That’s largely due to the massive amount of rain the hurricane dumped on Houston and the widespread flooding that resulted. That flooding damaged or destroyed many homes and cars, kept businesses from opening, damaged infrastructure, and kept people from getting to work, all of which has a negative impact on the local economy.
The losses brought about by that brief pause in the local economy can quickly be made up, however, particularly because the rebuilding efforts will inject a significant amount of money back in, and because Houston’s economy was booming before the storm. That’s not to say that the challenges for individual people will be overcome quickly, as many of them lost everything and are struggling to figure out even where to begin. But in terms of the larger economic picture, the work of rebuilding will provide jobs, while financial assistance from the federal government will bring the necessary capital to get the work done.
One potentially far-reaching impact of Hurricane Harvey involves the oil and gas industry, which makes up about one-third of Houston’s economy. A significant portion of the oil refining done in the US happens in and around Houston, and damage to those refineries cannot be easily repaired due to the lack of companies skilled in that particular type of work. Gas prices in Texas are already rising, and depending on how long it takes the industry to get back up to capacity, that impact could spread to the rest of the country as well.
Irma in Florida
The damage estimates in Florida in the wake of Hurricane Irma range from $64 billion to $92 billion, which is mainly due to the sheer size of the storm. Very few parts of the state escaped at least some impact, and so the rebuilding effort will have to be far-reaching as well. The situation is further complicated by the fact that there were not many large insurance companies operating in Florida, as most pulled out after a series of storms hit the state in the 2000s. That leaves an insurance market dominated by small companies, and it remains to be seen how they will handle the massive volume of claims they’ll be receiving in the coming weeks.
One area where Florida could see a lasting economic impact is in the tourism industry, the recovery of which will depend on how easy it is to get to Florida in the near future and how livable it is. That will vary from one part of the state to another as well, and so losses in this area may not be evenly distributed. September is typically a slow month for tourism, though, which gives the state some time to get back on its feet.
Agriculture is also a significant economic force in the state, and the storm has caused an estimated 12% drop in Florida’s citrus production for the year, as well as a 10% reduction in the sugarcane crop. Also impacting the agriculture industry is the fact that much of the housing for seasonal farm workers was damaged or destroyed by the storm, which may make it hard for farmers to get the help they need to bring in the harvest.
Maria in Puerto Rico
The catastrophic damage Hurricane Maria brought to Puerto Rico will have much more of a long-lasting economic impact on the island than either Houston or Florida will have to deal with. The storm knocked out all power to the island, and it may take anywhere from three to six months for it to be fully restored. Fuel supplies for generators are running low, and many of them run on diesel fuel, which is in particularly short supply.
The lack of power means that businesses can’t function normally, and although the total cost estimates are closer to $30 billion for this hurricane, that represents about one-third of the entire gross domestic product of the territory. Losses from tourism are another significant source of concern, as that industry was the only one in Puerto Rico that had shown consistent growth recently. The island was already in the midst of a decade-long recession, and that will be greatly exacerbated in the aftermath of the storm.
About 25% of the pharmaceutical drugs exported by the US are manufactured in Puerto Rico, which makes up a significant chunk of the island’s economy. These companies have been moving away from Puerto Rico in recent years since Congress decided to end special tax incentives for businesses operating on the island, and that trend is likely to accelerate in the near future. A similar exodus of people, particularly those with more means and more advanced skill sets is a concern as well.
All of these long-term problems pale in comparison to the crisis on the ground in Puerto Rico right now, and getting enough food, water, and other supplies to the island will likely be the main recovery priority for some time. Due to the island’s relatively small size, the economic impact of the storm may not be felt in other areas of the United States, but for Puerto Rico, it will be a very long road to recovery.