Hurricane Florence to Cost US Economy Over $35 Billion
Released on September 19, 2018
Hurricane Florence made landfall at Wrightsville Beach, North Carolina on September 14 before moving over eastern South Carolina. In addition to the tragic loss of life, the storm caused substantial wind damage and devastating flooding. Recent preliminary damages estimates by Moody's Analytics indicate property and short-term losses of $17-$22 billion.
Damages are only a part of the economic implications of the hurricane. Any economic stimulus, whether positive or negative, leads to additional responses and multiple rounds of business activity. Business operations have been interrupted, causing lost revenue and profits even beyond the damage to facilities. In many cases, these revenues cannot be recouped. Productivity has also been affected as workers are either absent due to problems with their homes and property or less effective on the job as they deal with those issues.
On the other hand, the act of repairing buildings and infrastructure damaged by wind and water leads to an increase in spending in the construction sector. Suppliers of the goods and services needed to get things back to normal will see additional opportunities due to Hurricane Florence. Replacing personal items, vehicles, furniture, and everything else will increase retail activity. These benefits partially offset the overall losses, though the long-term impact is decidedly negative.
The Perryman Group utilized its impact assessment model (described below) and current property damage estimates to measure the total economic cost of Hurricane Florence when multiplier effects and the various positive and negative aspects of the economics of the storm are considered. The net impact of Hurricane Florence could include losses to the US economy of more than $35.3 billion in total expenditures, $15.4 billion in real gross domestic product (constant 2009 dollars), $10.2 billion in personal income, and 107,500 person-years of employment.
For North Carolina, The Perryman Group estimates that losses from Hurricane Florence over the next few years include $25.7 billion in expenditures, $11.2 billion in real gross product, $7.4 billion in real personal income, and about 78,200 person-years of employment when multiplier effects are considered.
In South Carolina, The Perryman Group estimates that losses from Hurricane Florence include $3.3 billion in expenditures, $1.4 billion in real gross product, nearly $1.0 billion in real personal income, and about 10,100 person-years of employment when multiplier effects are considered.
These effects would be observed over a number of years. Although it will take time, recovery from these losses is expected along with a return to economic expansion in the future.
In order to offer this early perspective on potential losses, we used our US Multi-Regional Impact Assessment System and our econometric models to measure the dynamic effects of Hurricane Florence on the economy based on the most current preliminary estimates of damages and losses. The Impact Assessment System essentially measures the economic responses to a stimulus; in other words, it counts the successive rounds of business activity set off by the initial activity (in this case, the hurricane). The system has been in use for more than 35 years (with updates and refinements) and has been utilized on hundreds of occasions by clients ranging from large government agencies to private sector firms; it has also been peer reviewed. In this analysis, we have translated the estimated property losses into likely long-term losses in business activity (including the offsetting net effects of the subsequent rebuilding activity) using techniques previously developed by Dr. M. Ray Perryman, founder and president of the firm, and used in the assessment of prior storms (including Hurricanes Ike, Rita, Katrina, Harvey, Irma, and Maria).