Hurricane Irma: Not as bad as feared
The uncertainty around the Irma's path and intensity led to a number of different scenarios and implications for Florida leading up to the storm. Fortunately, the state avoided the worst-case scenarios. The short-term disruptions Irma caused were sizable but in terms of the $950 billion state economy it will not derail the impressive growth the state has seen over the past several years.
- Widespread power outages are stifling economic activity. On Monday, 5.7 million customers were without power and reports are that 3.8 million homes and businesses are without electricity as of Wednesday morning. Widespread outages will limit residents' ability to get back to regular activities this week, draining economic potential.
- Lost output will be in the billions. Florida generates about $18.5 billion a week in output or 5% of US GDP. Evacuations, lost tourism, residents taking off work for storm preparedness, all cut into would-be output. If economic activity in Florida were cut by 15% last week it would amount to $2.8 billion with further disruption spreading into this week. The actual percentage is impossible to say with certainty - local GDP data is calculated by the government in part based on worker earnings so part of the impact will depend on hourly earnings lost.
- These disruptions will linger for days not weeks. There were areas wrecked by wind and flooding and it will take time for debris to be cleaned up, waters recede, and power restored across the state. On the plus side, there have not been reports of widespread destruction of homes or infrastructure which will expedite the recovery. Major theme parks in Central Florida reopened on Tuesday as did Florida's airports and seaports (some at restricted capacity). Utilities will be working around the clock to get power restored with the initial focus on critical facilities (hospitals, public services, transportation providers) and high density areas. Some areas will take longer to get back to "normal" than others but in many cases it should be a matter of days not weeks.
- The Florida Keys was hardest hit but represents a small share of the state economy. Irma made landfall on the Florida Keys and FEMA estimates that 25% of homes were destroyed (more than 10,000 units). It will take time for the Keys to rebuild. Property insurance against hurricanes is commonplace in Florida, aiding the recovery. The Keys sit in Monroe County which accounts for less than 0.5% of Florida's population and economic output. While the personal toll is significant for parties involved the economic implications for the state are small.
- Jacksonville is grappling with record flooding. This situation is still unfolding. The Jacksonville MSA represents 8% of state GDP and is an important engine for the Florida economy. The MSA is sprawling with the flooding impacting some areas along the coast and St. Johns River. Portions of the Downtown have been impacted but it is not clear how bad the damages are until the waters recede.
- The aftermath will spur construction activity but may hurt tourism. GDP measures production and not destruction. Any post-storm rebuilding efforts represent a positive for economic growth and the local construction industry. The impact on tourism is less certain. The negative press from Irma could deter potential vacationers. Tourism is a critical component of the Sunshine state economy, with leisure and hospitality representing 14% of state employment and tourism representing 23% of the state's sales tax revenues. Florida has a long history of hurricanes with most major tourist destinations offering policies that refund and move planned trips ahead of major storms. It is possible that the hurricane news could deter some in the short-term but this will not be a long-term detriment. Florida's busy season starts in mid-December. The remnants of Irma will be long gone by then outside of the hardest hit areas.
Karl Kuykendall is a Principal Economist in IHS Markit's US Regional Service
Posted 13 September 2017