Hurricane Harvey cost hits $30B — but may rise to be costliest U.S. storm ever
Much of the economic costs unlikely to be covered by insurance
The human toll may be incalculable, but the economic cost of Hurricane Harvey has already hit $30 billion US, experts say — although the final bill may be much more than that.
The storm, which dropped record amounts of rainfall on southeastern Texas last week before gathering strength over the Gulf of Mexico and taking aim at Louisiana today has already wreaked $30-billion US worth of damage in the Houston area, a figure that is likely to rise.
Most affected homeowners are uninsured, so the insurance cost is likely to remain relatively low. But the cost to public infrastructure and corporate inventories is likely already at twice the $10 billion US insurance bill, analysts at Oxford Economics said Wednesday.
"Insurance will cover some of the reconstruction costs, but not all," Oxford said. And "even reconstruction covered by insurance is not a 'free lunch' since it comes out of insurers' profits and could lead to higher insurance premiums."
Economist Michael Dolega agrees broadly with that assessment, saying in a note on Wednesday that Harvey's cost is already on par with other major storms, including Hurricane Andrew in 1992 and Hurricane Ike in 2008, but has yet to eclipse in economic terms major storms like Sandy and of course Katrina.
That may change, however.
Weather forecasting company AccuWeather predicted Wednesday that Harvey's economic toll is likely to ultimately be up to $160 billion US.
"This will be the worst natural disaster in American history," AccuWeather president Joel N. Myers said, adding that the final economic bill could be larger than Sandy and Katrina put together.
"Parts of Houston, the United States' fourth largest city will be uninhabitable for weeks and possibly months due to water damage, mould, disease-ridden water and all that will follow," Myers said, urging banks, insurers and government policymakers to start adjusting their forecasts for the impact of the storm.
The impact of natural disasters on an economy are often hard to quantify, because they come in two completely different phases. Economic output typically plunges in the immediate aftermath, as the local economy effectively closes up shop.
But a little later, the local economy often sees a mini-surge during the rebuilding phase, "which will add to economic activity as homes and businesses are rebuilt and automobiles and other equipment is replaced," Dolega said.
In terms of job losses, the storm came too late to be a factor in the August numbers which are set to be released on Friday. But Dolega says past experience suggests we should expect somewhere between 20,000 and 50,000 lost jobs from the storm in September.
"Much depends on how quickly businesses can reopen and how quickly reconstruction gets underway," Oxford said.