The Cost of Harvey
Hurricane Harvey | Houston | Irma | Florida | Buffalo, NY | B Corp
When a hurricane strikes, the top priority is safety, which is reflected in immediate response by people all over the country converging on the effected cities to help those unable to evacuate. No one questions if the amount of funds allocated by the government on preventative measures, and rebuilding is too much because it’s the job of the government to protect its people, and that includes from natural disasters. But as the country recovers from Harvey and Irma, and now faces Maria, the question to ask is not how much it’s going to cost us of the money we currently have, but rather our future earnings and overall GDP growth.
Houston is the fourth largest city in the country, and is a large part of the reason that Texas alone contributes to 8% of our overall economic output. The $14.5 billion in relief is far from the only cost the country will face from this hurricane. The overall damage to such an important economic hub could have devastating long term effects on growth. Goldman Sachs told CNBC it could shave as much to an entire percent (1%) off GDP growth in the 3rd quarter. In the days after the storm struck, 10% of the nation’s overall refining capacity was shut off. Houston alone exported 21% of US chemicals in 2Q. Not only did the storm reduce the amount of exports but also created a lag in shipping them out. These losses do not even account for the jobs lost in one of America’s largest cities. Thousands of people who had homes, jobs, and lives in Houston may not be able to return to their lives. Historically, after storms like Katrina, and Sandy, the number of jobless claims have spiked by hundreds of thousands. Harvey will most likely not be any different. Though this ultimately will not be the most expensive hurricane the US has ever faced, its devastation will still be felt for some time to come.
Florida, though only half the size of Texas’ economy is still a large contributor to the nation’s GDP. It’s the fourth largest state economy in the country. Before the storm, state economists estimated a $52 million surplus, a surplus they now say is gone. Two of Florida’s major sectors are expected to take a hit: Agriculture and tourism. Tourism is expected to recover some what quickly; though the state lost billions from the storm, there will still be lines at Disney world in the coming months, and vacations to Miami Beach through the winter and spring.
The same cannot be said for its agriculture. Before the storm, agriculture production in Florida had a projected value of around $1.2 billion. However now, farms have been left completely destroyed: “In Brevard County, east of Orlando, roughly 50,000 acres of pasture were underwater.” It’s currently estimated that Florida’s citrus industry may have suffered around 50% losses. Florida Oranges were already facing challenges before the storm. With 50% losses do farmers even return or just accept an early retirement?
With Irma barely a week old, and Maria approaching, it’s still too soon to know the full effects of these hurricanes on the economy. Currently, though devastating, it does appear the cities effected will make recoveries. However, if storms of this magnitude are becoming a regular occurrence, and if they continue to hit with the same frequency as they did this year, our economy may be facing insurmountable odds.