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. (Source: "Gross Domestic Product by State," Bureau of Economic Analysis.)

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. 

Goldman Sachs estimated that Hurricanes Harvey and Irma will decrease U.S. growth in the third quarter by 1 percent.

It said Hurricane Harvey could reduce the September employment report by 100,000 jobs. But rebuilding will boost growth in the fourth quarter (October - December.) That's based on its analysis of the 35 largest hurricanes since World War II. The storms reduce growth in the month they hit, but growth rebounds significantly in the following two to four months. 

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. As a result, hurricanes are expected to occur throughout October and even November. 

Hurricane Maria was a Category 5 storm that hit Dominica on September 18, 2017. On September 20, the storm devastated Puerto Rico, home to 3.5 million Americans. 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. Maria left 30 percent of the population without power in the Dominican Republic. The death toll is 45 as of October 11, 2017. There were 15,000 people in government shelters.  

Hurricane Irma was the most powerful Atlantic hurricane in recorded history. Accuweather estimates 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 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.  (Source: "Accuweather Predicts Economic Cost of Harvey, Irma to Be $290 Billion," Accuweather, September 11, 2017. "Hurricane Irma Churns Through Caribbean Islands," Reuters, September 6, 2017. "Hurricane Andrew: The 20 Miles That Saved Miami," Swiss Re Insurance Company, 2017.)

Hurricane Harvey was a Category 4 storm that hit Texas on August 25, 2017. Texas Governor Greg Abbott estimated damage at $180 billion. It affected 13 million people from Texas through Louisiana, Mississippi, Tennessee and Kentucky. Seventy people have died from the storm. (Source: "Hurricane Harvey Death Toll Hits 70," NBC Dallas/Ft. Worth, September 6, 2017. "Hurricane Harvey Damages Up to $180 Billion," Fortune, September 7, 2017)

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. (Source: Gasoline Prices Jump in Harvey's Wake," The Wall Street Journal, August 31, 2017.)

How Do Hurricanes Cause Damage?

Hurricane damage occurs from seven sources. First is high winds. The Saffir-Simpson Hurricane Wind Scale puts wind speeds and damage inflicted 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. (Source: "Storm Surge," National Hurricane Center.)

Third is 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 downbursts create flash floods. Flooding accounts for 59 percent of deaths. It also ruins equipment, automobiles and homes. (Source: "Hurricanes and Extreme Rainfall," IM Systems Group.)

Fourth is location. Most hurricanes that affect the United States 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. (Source: "How Do Hurricanes Form?" NASA Space Place.)

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 its the least windy time of year. High winds destroy hurricanes before they have a chance to form. (Source: "The Peak of Hurricane Season- Why Now?" National Oceanic and Atmospheric Administration.)

Sixth is preparedness. Cities that evacuate their population will have fewer deaths and human destruction. But it won'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. Fortify your roof with hurricane clips. Many builders are using insulating concrete forms instead of timber construction. They also anchor the home to the foundation  (Source: "Eight Ways to Protect Your Home Against Tornadoes and Hurricanes," Popular Mechanics, September 5, 2017.)

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. 

Which Hurricanes Caused the Most Damage?

Hurricane Katrina was the most damaging hurricane by far. University of North Texas Profession 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 $108 billion. Half of these losses were a result of flooding in New Orleans. 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.

Hurricane Irma was the third worst. The Category 5 storm cost $100 billion. 

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 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
1KatrinaFL, LA, MS20053$108-$250
2HarveyTX,LA20174$180 (est.)
3IrmaFL20175$100 (est.)
4MariaPR20175  $85 (est.)
5SandyNY, NJ, MA 2012TS  $71.4
6IkeTX, LA20082  $29.5
7AndrewFL, LA19925  $26.5
8WilmaFL20053  $20.6
9IreneNC20111  $15.6
11CharleyFL20044  $15.0
12IvanAL, FL20043  $14.2
13RitaLA, TX20053  $10.0
14FrancesFL20042    $8.9
15HugoSC19894    $7.0
16JeanneFL20043    $6.9
17AllisonTX2001TS    $5.0
18FloydNY, MA19992    $4.5
19GustavLA20082    $4.3
20IsabelNY, MA20032    $3.4

(Source: "The Thirty Costliest U.S. Tropical Cyclones," Not adjusted for inflation. NOAA Technical Memorandum, August 2013.)