Swift economic restoration in regions devastated by Milton and Helene's impact could potentially occur sooner than anticipated.
Two significant urban areas reported an unemployment rate of 3.1% in August, lower than their home states and the nation at large, as per Labour Department data. The surge in population post-Covid has triggered a surge in new home construction.
However, Hurricanes Helene and Milton pose a potential threat to these gains. The hurricanes caused substantial property damage, accumulated streets with debris, left numerous residents without power and clean water, and forced closures of numerous schools and businesses temporarily.
Is it possible for the economies in these affected areas, like Asheville and Tampa, to fully recover from the hurricanes? Past hurricanes may offer a more optimistic outlook than anticipated.
What was the impact of previous major hurricanes on local economies?
The economic activity plummeted in the short term following Hurricane Katrina in New Orleans, Hurricane Harvey in Houston, and Hurricane Irma in Columbia, South Carolina. However, within a year of these hurricanes, economic activity bounced back to levels equal to or even surpassing their pre-hurricane states.
A 2020 report from the Government Accountability Office (GAO) confirmed this trend. The authors of the report measured economic activity through the labor market, housing market, credit market activity, and overall income and output in the major metropolitan areas impacted by the respective hurricanes.
However, in 28 other metropolitan areas assessed by the GAO, which were also hit by hurricanes Katrina, Harvey, Irma, and Sandy, economic activity did not even fall below historical averages in the month of the hurricane or three months afterwards.
State officials in Texas informed the authors that recovery is more expedient in larger communities such as Houston, where local governments have staff with expertise in disaster management. Larger communities also benefit from having more financial resources to invest in emergency services with substantial fixed or upfront costs.
Local officials in Louisiana told the authors that New Orleans' weak post-Katrina economy was due to residents permanently relocating and the "reduction in the local oil and gas industry, a major employer, before the storm."
Post-Helene and Milton Expectations
The extent of aid provided and the amount of insurance coverage by residents will significantly impact the speed of recovery, according to Adam Kamins, senior director and regional economist at Moody's Analytics.
In some cases, an influx of federal aid can even contribute to job creation following a storm.
"Katrina is the classic example where this didn't occur, with a large exodus of people and federal aid not being as generous as needed," Kamins told CNN.
Parts of Florida might see residents leaving if home and flood insurance rates continue to increase post-Helene and Milton, Kamins cautioned. This would make economic recovery more challenging, although it would not necessarily cause housing prices to tank due to the reduction in housing supply from the storm.
On the other hand, areas in inland North Carolina, where many residents lacked flood insurance, would be heavily dependent on federal aid for rebuilding. This could limit their resilience to recover.
Especially in Asheville, where tourism has seen a notable uptick, Kamins expressed concern about many hotels and restaurants choosing not to rebuild, either because they weren't insured or due to the uncertainty of another storm striking again. "This could result in significant long-term damage."
Despite the hurricanes causing temporary closures of numerous businesses in Asheville and Tampa, their resilience in recovering from previous major hurricanes offers hope. As shown in New Orleans and Houston, economic activity often bounces back to pre-hurricane levels or even surpasses them within a year.
However, the extent and speed of recovery in Asheville and Tampa could be influenced by various factors, such as the amount of insurance coverage and federal aid, as well as the decisions of local businesses regarding rebuilding after the storms.
