Harvey: The Costliest Storm

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Harvey: The Costliest Storm

An aerial view shows extensive flooding from Harvey in a residential area in Southeast Texas on Aug. 31. (photo by Staff Sgt. Daniel J. Martinez, Air National Guard)
An aerial view shows extensive flooding from Harvey in a residential area in Southeast Texas on Aug. 31. (photo by Staff Sgt. Daniel J. Martinez, Air National Guard)

Harvey cost to rival Katrina and Sandy combined

Because of the extraordinary nature of Hurricane Harvey, it is largely impossible to know the full impact to the Gulf Coast region and the state and nation as a whole, at least until well after the full extent of the damage is seen. It is now widely recognized that the damages from Harvey will by far exceed the damages of Hurricane Katrina, which up until now was the costliest storm to have hit the United States. The cost of Harvey is expected to be higher because of the intensity of the storm, the significantly larger population affected, and the region’s critical role in the nation’s energy industry as well as supply chains. The best available, most recent estimate from AccuWeather indicates the damage caused by Harvey could be as high as $190 billion, making it equal to the cost from Hurricanes Katrina and Sandy combined. This estimate is obviously preliminary and it will be months before a clear picture can be obtained.

In an effort to offer an initial quantification of potential outcomes, The Perryman Group has conducted analysis of the economic impact of a storm of this magnitude on overall economic activity. This analysis reflects a dynamic pattern of recovery typical of property loss and economic responses on past major Gulf Coast storms, fully accounting for the significance of the refining and port infrastructure in the area and its linkage to overall national activity; the latest information regarding insurance patterns; typical patterns in Federal aid; and the offsetting effects of the rebuilding process. (The Perryman Group has analyzed similar issues related to Gulf Coast storms on numerous occasions.)

Based on this model, The Perryman Group estimates that economic impact from Hurricane Harvey could include losses to the U.S. economy, which would be observed over an extended period of time of $145.0 billion in real gross domestic product (constant 2009 dollars), $95.9 billion in real personal income, and 1.01 million person-years of employment. The bulk of the impact falls on Texas and Louisiana, with Texas seeing losses of $110.3 billion in real gross state product, $73.0 billion in real personal income, and 771.6 thousand job years. The losses in Louisiana over time are estimated at $8.7 billion in real gross state product, $5.7 billion in real personal income, and 60.8 thousand job years. 

It should be noted that values represent about seven percent of the annual output and income levels of Texas; however, these losses will be felt over an extended period. Thus, while the effect on the Texas economy is significant, it is not likely to derail its long-term pattern of growth for an extended period of time.

Article courtesy of The Perryman Group

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