As Hurricane (now Tropical Storm) Michael moves from the Florida Panhandle and Georgia toward the Carolinas and Virginia, experience from past hurricanes indicates that economic fallout from the storm is likely to be small. Michael will result in a temporary loss of output from businesses shutdowns from the storm. However, the impact will be limited as firms reopen after the storm leaves. Property damage from Michael could also result in a temporary decline in economic activity.
Any economic damage will be small and temporary, however, likely limited to the fourth quarter of 2018. Panama City, the hardest-hit metro area in the Florida Panhandle, accounts for only 0.04 percent of US GDP, and 0.06 percent of US employment. Other metro areas in the Southeast were disrupted by the storm, but to a lesser extent. Most people will get back to work shortly after Michael leaves.
In addition, any lost output and employment are likely to be made up in subsequent quarters. If Michael does cause extensive damage, reconstruction in the wake of the hurricane, funded by insurance payouts and federal aid, will boost affected local economies and hiring in late 2018 and early 2019. Similar patterns have been seen with other natural disasters, such as Hurricanes Harvey and Irma last year, Superstorm Sandy, Hurricane Andrew, and the Northridge earthquake.
The two recent US natural disasters that had significant long-run economic impacts were Hurricanes Maria and Katrina. Because of extensive damage there were permanent declines in population and employment in Puerto Rico (from Maria) and New Orleans (from Katrina). But the national impact from both storms was limited as economic activity flowed to other parts of the country. And the population losses and extensive and permanent damage in Puerto Rico and New Orleans in the wakes of Maria and Katrina are unlikely to be repeated with Florida and Michael.
PNC Bank Chief Economist Gus Faucher