MacroPolicy Perspectives
MacroPolicy Perspectives LLC

Links from MPP

Links from MPP

Will the Economy Go Under Too? Second to a Humanitarian Crisis, Hurricanes are a Balance-Sheet Shock

As we assess the aftermath of Hurricanes Harvey and Irma, the main economic and political question revolves around who will bear the burden of these losses. Hurricanes are first and foremost a balance sheet shock. There will be sizable property losses for households, businesses, and public infrastructure. Using past hurricanes and current political discussions as a guide, we estimate that the federal government is likely to bear the greatest share of an estimated $120bn to $340 billion in total losses from the two hurricanes through the issuance of debt financed aid. The remainder of the losses will either be funded by private insurance or borne by the property owners themselves. While hurricanes imply sizable losses, they have a much more muted impact on GDP growth. The hurricanes may subtract 0.5pp from Q3 annualized GDP growth through some lost consumption and disruptions in activity. Jobs figures for September should be around zero or may even show a decline in employment. However, employment will likely recover before year end while reconstruction efforts will boost growth modestly and gradually throughout 2018. Overall the hurricane impact on GDP growth will likely be overshadowed by the larger trend and cyclical forces.

http://www.rutgersrealestate.com/blog-re/will-the-economy-go-under-too/

Coronado Julia
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