Hurricanes Harvey and Irma not only devastated thousands of lives and destroyed billions of dollars' worth of property, they may also have done long-term damage to the competitiveness of two of America's most economically important states — Texas and Florida.
With a gross domestic product of $1.5 trillion dollars last year, Texas accounted for nearly 8 percent of total U.S. economic output, according to the Commerce Department's Bureau of Economic Analysis. Florida's economy is smaller — about half the size of Texas' — but its range of industries, including tourism, ports, business services and health care, magnifies the impact from Irma.
All told, economist Diane Swonk of DS Economics says the two storms — and the impact in the two states — could slow overall U.S. economic growth by a full percentage point this quarter, to 1.8 percent compared to projections of 2.8 percent growth before the storms. And while conventional wisdom suggests a corresponding boom once the states begin to rebuild, Swonk is not so sure that will be the case this time.
"You're putting a stress that we've never seen on an economy that already doesn't have labor and doesn't have materials," she said.
Unemployment in both states has been tracking near or below the national average, leading to worker shortages even before the storms. In Texas, where Hurricane Harvey began bearing down on the state in the final days of August, unemployment came in at 4.2 percent. In Florida, where preparations for Irma had not yet begun in August, unemployment was just 4 percent. And while natural disasters like hurricanes ultimately tend to increase the numbers of newly unemployed people available for rebuilding, Swonk says Florida and Texas are special cases.
"These are two places where you happen to have a disproportionate amount of illegal immigrants that do work in the workforce, they do work in construction, and they're sitting targets," she said, noting that Texas and Florida tend to take a harder stand on immigration than most states. If undocumented workers choose to avoid the states for fear of deportation, Swonk says, it could slow the recovery even more.
Add to that a shortage of building materials due to cuts in manufacturing capacity dating back to before the 2008 financial crisis, and the prospects become even more dire.
"It took eight years to rebuild Homestead (Florida) after Hurricane Andrew," Swonk said.
Harvey and Irma struck much larger areas, in states with very different but equally vital economic roles.