Hurricane Harvey Macro And Micro Impact

Two and a half years after Hurricane Harvey slammed the Texas Gulf Coast, the first surprising thought is how quickly the Texas economy has recovered, and how quickly households have recovered.

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Houston underwater after Hurricane Harvey

According to the governor’s report on the storm impact, the estimated $125 billion in losses made this the second-costliest natural disaster ever in the United States. (Hurricane Katrina’s impact on New Orleans in 2005 was the only costlier disaster.)
And yet, the state comptroller’s office estimated the impact on state economic output – the equivalent to GDP but for Texas – estimated a 3-year net economic gain of $800 million, due to Harvey 

A big temporary hit to state income in year one following the storm – estimated as a $3.8 billion loss – is actually made up for by the spur in economic growth by the need to rebuild in years two and three, estimated at $2.1 billion and $2.5 billion respectively. It’s a stunningly healthy macroeconomic recovery from a major economic shock, with obviously a lot of variation across the state.

Researchers have also used the experience and time since Harvey to study the economic effects on the finances of households, what we could think of as the microeconomic impact of the storm.

A paper released in mid-February by the Federal Reserve of St. Louis and written by economists at the University of Colorado explores the rates of bankruptcy and rates of access to federal financial assistance by affected households in Houston following Harvey.

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St. Louis Fed Building, 1924

These economists studied household recoveries to see whether – underneath the average strong recovery of households – what kind variation existed. They found a few significant variations. 

They show that two types of households weathered the financial hit of Harvey the best: People who happened to live inside the designated floodplain – presumably already forced to be covered by flood insurance – had lower rates of bankruptcy.

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This post ran a few months ago in The San Antonio Express-News and Houston Chronicle.

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