Preview of Hurricane Florence economic impact

Hurricane Florence currently is approaching the Carolinas as a category 2 hurricane. Landfall is expected later tonight or tomorrow. Authorities are warning of lifethreatening storm surges, catastrophic flooding, and damaging winds, and a mass evacuation is underway. We hope our clients and readers in the region stay safe. Below we provde a little insight into the economic impact of the storm.

Impact on GDP

While its too soon to gauge the impact on GDP from Hurricane Florence, past experience suggests only a modest hit to third-quarter GDP growth and a modest boost to fourth-quarter growth.

Hurricanes, while having a devastating impact in directly affected areas, also give rise to activity that otherwise would not take place. Prime examples include preparation, travel and lodging associated with evacuation, and recovery.

Another possible offset is geographically re-sourced activity. That is, with a few days of notice, business can re-source activity away from potentially affected areas to businesses in other areas that can "pick up the slack."

Impact on employment figures

The impact of Hurricane Florence on payroll employment is likely to be small to nil: a person is counted as employed in the payroll survey if they worked or received pay for any portion of their pay period that includes the 12th of the month. For any normal pay period (weekly, biweekly, semimonthly, and monthly), if a person was working on Monday, they worked for at least one day of their pay period that includes the 12th. Therefore, they will be counted as employed in September even if they evacuated on Tuesday.

Hurricane Florence could show up in hours worked and average hourly earnings: the payroll survey keeps tabs on pay and hours worked, and salaried individuals who are temporarily away from work due to storm disruptions will experience a temporary jump in earnings per hour.

Hurricane Florence probably will not show up in the headline unemployment figures: those temporarily displaced this week will be counted as employed in September as long as their job is not terminated.

Posted 14 Sep 2018 by Ben Herzon, Ph.D., Executive Director, Macroeconomic Advisers by IHS Markit and
Joel Prakken, Ph.D., Chief US Economist and co-head of US Economics, Macroeconomic Advisers by IHS Markit