How Hurricanes Damage the Economy

Why Harvey, Irma, Maria and Other Hurricanes Are So Destructive

Hurricane damage
••• Andrew White (L) helps a neighbor down a street after rescuing her from her home in his boat in the upscale River Oaks neighborhood after it was inundated with flooding from Hurricane Harvey on August 27, 2017 in Houston, Texas. Photo by Scott Olson/Getty Images

Hurricanes are the most damaging natural disasters. They are perilous for the people living in their paths and for the national economy. A Category 4 or 5 hurricane can lower U.S. production and increase unemployment. It can raise gas prices to $5 a gallon. It can also depress the stock market and other financial markets.

The United States is very vulnerable to hurricane damage. Over one-third of its gross domestic product is from states along the Gulf and Atlantic coastline.

That includes 72 of its ports, 27 percent of its major roads, and 9 percent of its rail lines. 

The Congressional Budget Office estimates that 1.2 million Americans live in coastal areas at risk of “substantial damage” from hurricanes. The CBO defines that as damage of at least 5 percent of average income. Most of this densely populated area lies less than 10 feet above sea level, according to the National Hurricane Center. 

The CBO estimates that, on average, hurricane damage is $28 billion a year. Florida contributes 55 percent of that, Texas 13 percent, and Louisiana 9 percent. 

The federal government pays for 60 percent of hurricane damage. Most of that comes from three agencies. The Federal Emergency Management Agency pays almost two-thirds of the government's bill. The Department of Housing and Urban Development and the U.S. Army Corps of Engineers pay a little more than a third. State and local governments, insurance, and private individuals pay the rest.


By 2075, the average annual damage costs will increase to $39 billion. Almost half of that gain is due to climate change, while the other half is from increased development along U.S. coastlines. 

2018 Hurricane Season

The National Oceanic Atmospheric Administration said the 2018 season could be worse than average.

It predicted a 70 percent likelihood there may be 10 to 16 named storms. Five to nine of them could become hurricanes. One to four of those could turn into major hurricanes of Category 3 or above. 

2017 Hurricane Season

The 2017 hurricane season was particularly harsh. A high pressure system kept the northeast in summery temperatures through September. It also kept cooler winds from Canada out of the region. Those winds usually drive hurricanes out to sea. Another high pressure system developed around Bermuda. That sent hurricanes right into Florida and the U.S. east coast. 

Hurricane Maria was a  Category 5 storm when it hit Dominica on September 18, 2017. On September 20, it devastated Puerto Rico, home to 3.5 million Americans. Even though it had been downgraded to a Category 4 storm, it still cost $90 billion in damage. The official death toll is 64. but a New York Times analysis said it could be 1,052. In May 2018, researchers estimated that 4,645 died after the storm knocked out electricity and transportation. Many chronically ill people died because they could not get the care they needed.

Governor Ricardo Rossello asked for $94 billion in federal aid to restore power and housing.

Insurers estimated their costs would be $85 billion. Maria knocked out power to the entire island and felled cell phone towers.The Trump administration will ask for $36.5 billion in federal relief aid and debt forgiveness for Puerto Rico. Maria weakened a dam enough to force authorities to evacuate 70,000 people.There were 15,000 people forced into government shelters. Maria left 30 percent of the population without power in the Dominican Republic.

Hurricane Irma was the most powerful Atlantic hurricane in recorded history. Damage was $50 billion. Accuweather estimated total cost to the economy at $100 billion. It was a Category 5 storm when it made landfall on Barbuda on September 6, 2017. Its winds were 185 miles per hour for 37 hours, a new record. It was downgraded to a Category 4 before it hit the Florida Keys on September 10.

That was the first time in 100 years that two storms Category 4 or larger hit the U.S. mainland in the same year. President Trump declared emergencies in Florida, Puerto Rico, and the U.S. Virgin Islands. Congress appropriated $35.5 billion in emergency funding. Of that, $16 billion is debt forgiveness for the National Flood Insurance Program.

Hurricane Harvey was a Category 4 storm that hit Texas on August 25, 2017. At first, Texas Governor Greg Abbott estimated damage at $180 billion. The National Hurricane Center said the final figure was $125 billion. It affected 13 million people from Texas through Louisiana, Mississippi, Tennessee, and Kentucky. Eighty-eight people died from the storm. Congress appropriated $15 billion for disaster relief.

Harvey damaged 200,000 homes, of which 12,700 were destroyed. More than 500,000 people asked for federal assistance. The storm forced 5 percent of the nation's oil and gas production to shut down. Gas prices rose from $2.35 a gallon before Harvey hit to $2.49 a gallon. 

How Hurricanes Cause Damage

Hurricane damage occurs from seven sources. First is high winds. The Saffir-Simpson Hurricane Wind Scale puts wind speeds, damage inflicted, and power outages into five categories.

CategoryWind SpeedSurge in FeetDamageHome DamageTree DamagePower Outages
174-95 mph4-5SomeSomeBranchesDays
296-110 mph6-8ExtensiveMajorSnappedWeeks
3111-129 mph9-12DevastatingMajorSnappedWeeks
4130-156 mph13-18CatastrophicSevereToppledMonths
5157+ mph19+CatastrophicDestroyedToppledMonths

Second is storm surge. That's the rise in water above normal high tide. The hurricane's high winds pushes the water up onto the shore. When the storm surge coincides with high tide, you get storm tide. That unusual occurrence created the devastation during Hurricane Sandy. Water weighs 1,700 pounds per cubic yard. The force of the storm and the weight of the water combined is very damaging.

A 23-foot storm surge would flood 67 percent of U.S. interstates, including 57 percent of arterial highways. It would cover almost half of rail miles, 29 airports and almost all ports in the Gulf Coast area. 

Third is extreme rainfall. Hurricanes can drop up to six inches of rain per hour. Hurricane Harvey dumped 51.88 inches in Cedar Bayou on August 26, 2017. That’s a record for a single storm in the continental United States. These down-bursts create flash floods. Flooding accounts for 59 percent of deaths. It also ruins equipment, automobiles and homes. 

Fourth is location. Most U.S. hurricanes form in the Gulf and Caribbean. Hurricanes only form over oceans near the equator. As warm moist air rises, cool dry air rushes in to replace it. If this cycle intensifies enough, it creates a hurricane. Once these storms make landfall, they lose power without the warm moist ocean air to feed them. 

Fifth is the time of the year. Hurricane season is from June 1 to November 30. The most dangerous time is between mid-August and mid-October. That's because it's the least windy time of year. High winds destroy hurricanes before they have a chance to form. 

Sixth is preparedness. Cities that evacuate their population have fewer deaths and human destruction. But evacuations don't prevent property damage. Most hurricanes enter the home through the garage. The most-storm resistant are windowless garage doors less than nine feet wide that can withstand 50 or more pounds of pressure. Homeowners should fortify their roofs with hurricane clips. Many builders are using insulating concrete forms instead of timber construction. They also anchor the home to the foundation.

A seventh and recent cause is global warming. Between 1956-2005, the Earth's average temperature rose .13°C each decade. This might not seem like much, but that's double the rate for the 100 years between 1906 and 2005. Antarctic glaciers are losing mass at an "unusually rapid" rate. That increases sea levels which worsen storm surges.

Climate change may also cause hurricanes to remain in place longer. A 2018 study found hurricanes have slowed by 10 percent since 1949. The steering winds that push them are slowing down. These winds draw power from the temperature differences between the tropics and the poles. But climate change has raised pole temperatures. That lessens the temperature difference, weakening the winds that now move hurricanes more slowly.

Which Hurricanes Caused the Most Damage

Hurricane Katrina was the most damaging hurricane by far. University of North Texas Professor Bernard Weinstein put the total economic impact at $250 billion. It damaged 19 percent of U.S. oil production, causing gas prices to rise to almost $5 a gallon. As a result, economic growth slowed to 1.3 percent in the quarter after Katrina. That's down from the 3.8 percent growth before the storm.

The National Hurricane Center estimated direct damage at $125 billion. Half of these losses were a result of flooding in New Orleans. Katrina hit Louisiana on August 29, 2005. It left 1,836 people dead. It was a Category 3 when it made landfall. Katrina had been a Category 5 when it was still out to sea.

The second most damaging was Hurricane Harvey. This Category 4 storm cost $180 billion. It hit Texas on August 25, 2017.

Hurricane Irma was the third worst. The Category 5 storm cost $100 billion. It hit Puerto Rico on September 7, 2017, and Florida on September 10, 2017.

Hurricane Sandy caused $71.4 billion in damage. It hit New Jersey on October 29, 2012. It combined a 990-foot wide hurricane, a cold front and storm tides worsened by a full moon. It damaged 650,000 homes. Eight million customers lost power. Sandy was responsible for 159 deaths.

Hurricane Ike cost $29.5 billion. It hit Galveston Island, Texas, on September 13, 2008. It destroyed 10 Gulf offshore oil rigs. All 22 Texas land-based oil refineries were shut down. Gas prices spiked to $5.00/gallon. Ike was a Category 4 at its peak. It calmed down to a Category 2 when it hit Texas. The area had just been devastated by Hurricane Gustav. It hit Louisiana two weeks earlier. Gustav cost $4.6 billion. It had been a Category 4 at its peak, but calmed down to a Category 2 by landfall.

Hurricane Andrew comes next. It was a Category 5 storm that hit Florida in 1992. It destroyed $26.5 billion in property. It hurled a 16.9-foot storm tide into Biscayne Bay, a record for the southeast Florida peninsula. A storm tide is the sum of the storm surge and high tide.

Next was Hurricane Wilma. This Category 3 storm did $20.6 billion in damage. It pummeled Florida in 2005 with winds as high as 120 miles per hour. 

Hurricane Irene came next. It was a Category 2 storm when it hit North Carolina on August 26, 2011. It had lost a lot of power as it traveled over land toward New York and Boston. Many people only experienced a bad storm. But it killed at least 20 people and left 4.5 million people without power. Storm surges in Manhattan were 9 feet high. Property damage was $15.6 billion. Economic impact was $45 billion.  (Source: "Economist: Financial Hit From Hurricane Irene Could Top $45 Billion," Fox News Insider, August 29, 2001. "Hurricane Irene's Economic Impact," NPR Nightly Business Report, August 24, 2011.) 

The deadliest U.S. hurricane was in 1900. It affected between 8,000 to 12,000 people in Galveston, Texas. That storm killed 129 people and caused $1.7 billion in damage ($13 billion in today’s dollars) in June 1972. In October 1954, Hurricane Hazel killed 95 Americans and 81 Canadians. It was a Category 4 hurricane. (Source: "The Thirty Costliest U.S. Tropical Cyclones," Not adjusted for inflation. NOAA Technical Memorandum, August 2013.)

Top 20 Hurricanes

Here are the 20 most destructive storms to hit the United States. Notice that 17 of them have occurred since 2000. That's further proof of the worsening impact of climate change.

RankNameStatesYearCategoryDamage in Billions
     Not AdjustedAdj. for Inflation
1KatrinaFL, LA, MS20053$125.0   $160.0
2HarveyTX,LA20174$125.0   $125.0
3MariaPR20175  $90.0     $90.0
4SandyNY, NJ, MA 2012TS  $65.0     $70.2
5IrmaFL20175  $50.0     $50.0
6IkeTX, LA20082  $30.0     $34.8
7AndrewFL, LA19925  $27.0     $47.8
8IvanAL,FL20043  $20.5     $27.1
9WilmaFL20053  $19.0     $24.3
9RitaLA,TX20053  $18.5     $23.7
11CharleyFL20044  $16.0     $21.1
12IreneNC2011  $13.5     $14.9
13MatthewSE US20161  $10.0     $10.3
14FrancesFL20042    $9.8     $12.9
15AllisonTX2001TS    $8.5     $11.8
16JeanneFL20043    $7.5       $9.9
17HugoSC19894    $7.0     $14.1
18FloydNY, MA19992    $6.5       $9.6
19GustavLA20082    $6.0       $6.9
20IsabelNY, MA20032    $5.5       $7.4

(Source: From "Table 3a and Table 3b. Mainland United States Tropical Cyclones Causing at Least $1 Billion in Damage," National Hurricane Center, January 26, 2018.)