How Natural Disasters Can Disrupt Economies: Helene and Milton

Natural disasters bring about economic shocks that extend beyond immediate physical damage. Hurricanes Helene and Milton, which recently hit Florida, disrupted vital industries like energy and trade. These events have had ripple effects that impacted employment, consumer spending, and supply chains within the U.S. Given Florida’s significant economic role, these natural disasters reached beyond the national level, sending shockwaves through global financial markets.

Insurance Market Crisis and Energy Disruptions

The destruction wrought by these storms raised critical questions about the sustainability of the insurance sector in high-risk regions. Early estimates from Moody’s Analytics suggest that damages from Helene could reach approximately $20-34 billion¹, while Milton threatens to inflict tens of billions more, according to Jefferies analysts². As claims surge, insurers may be forced to raise premiums due to these damages, complicating recovery not only for the affected residents but also for the broader economy. Rising insurance costs deter investments, strain budgets, and slow economic growth. When households and businesses are forced to allocate a larger portion of their income towards insurance and other recovery costs, they have less to spend on goods and services – even if they are necessities like food – further slowing economic recovery.

Another key disruptor to Florida’s economy has been the turmoil in energy supplies. Fuel shortages have created severe bottlenecks in supply chains, leading to long lines at gas stations and driving up prices. According to the Fortune magazine³, “Many Floridians faced the frustration of finding gas,” with nearly 25% of stations being out of petrol. Such scarcity compounds inflationary pressures already present in the state, amplifying economic strain across the region. Long waits and high fuel costs also impact transport-dependent businesses like logistics and retail, leading to delayed goods, increased production costs, and elevated consumer prices, prolonging the economic challenges posed by hurricanes.

Tourism, Employment, and GDP

Florida’s economy – heavily reliant on tourism – suffered significant blows due to the hurricanes. The closure of Walt Disney World, a major contributor to the state’s economy, led to immediate revenue losses and job cuts. Estimates indicate that the storms could result in a loss of 40,000 to 50,000 jobs in the hospitality sector alone⁴. Disney World significantly boosts Florida’s economy, contributing an estimated $40.3 billion in 2022⁵. This includes both direct impacts and indirect effects through its supply chain, visitor spending, and the creation of jobs across sectors like hospitality, retail, and transportation. Disney is responsible for supporting over 263,000 jobs in the state⁶. This disruption, alongside damage to tourism infrastructure, has had an immediate effect on Disney’s stock price, reflecting investor anxiety about revenue losses in the short term, with the stock value falling by 2.75%, closing at $92.54⁷.

(NYSE: DIS) Disney Stock Performance During Hurricane Milton (October 5-10, 2024)

The impact on tourism reverberates through the economy, affecting everything from local businesses to state GDP. Since the tourism sector is a key driver of Florida’s economy, accounting for around 20% of its GDP, the long-term recovery for the industry and the overall state economy may be gradual. This disruption also weighs on consumer confidence, limiting spending and further slowing the recovery process, especially with many industries still grappling with fuel shortages and infrastructure damage across the state.

Silver Lining – Economic Rebuilding Efforts

While natural disasters like Hurricanes Helene and Milton cause widespread damage, recovery offers economic opportunities. Rebuilding efforts will likely create jobs in sectors such as construction, infrastructure repair, and related industries. While exact projections for the economic impact of these hurricanes are still forthcoming, recovery activities have historically played a key role in restoring economic stability by injecting capital into local economies and supporting job creation.

An example of such recovery can be seen along the coastline: According to Business Observer, Florida’s government allocated $9.5 million to support post-Milton recovery at SeaPort Manatee⁸, with a focus on berth repairs and improving security. The funding is expected to restore vital infrastructure and ensure the port’s operations are back to full capacity, driving demand for additional labour. In fact, the U.S. Bureau of Economic Analysis (BEA) reports that post-disaster reconstruction efforts can boost employment in construction and related sectors by 10-15% in the first few months following the event. In the case of Hurricane Harvey in 2017, Texas experienced more than $120 billion in economic losses, but the recovery phase alone led to the creation of over 60,000 jobs in the construction and repair sectors.

The rebuilding process is expected to provide a critical economic stimulus as Florida works to restore homes, businesses, and essential services. This proactive approach turns vulnerabilities into opportunities for sustainable growth, ensuring economies not only survive but thrive in adversity.

References

‘Moody’s Analytics, The Insurer, “Moody’s Analytics Says Helene Like Idalia, But Worse, with Cost Estimated at Up to $34bn,” The Insurer,

https://www.theinsurer.com/news/moodys-analytics-says-helene-like-idalia-but-worse-with-co

st-estimated-at-up-to-34bn/.

¿Jefferies analysts, Yahoo Finance,

“Hurricane Milton Headed for Florida: What to Expect,”

Yahoo Finance, https://news.yahoo.com/news/hurricane-milton-headed-1-1-071239610.html.

Fortune, “Fuel Shortage Strikes Florida Amid Hurricane Milton: Long Lines and Station Closures,” Fortune,

https://fortune.com/2024/10/13/fuel-shortage-florida-long-lines-gas-stations-hurricane-milton= relief/?utm source=search&utm_medium=suggested_search&utm_campaign=search_link c licks.

Fox Business, “Hurricane Milton Leaves Thousands of Florida Gas Stations Without Fuel,” Fox Business,

https://www.foxbusiness.com/lifestyle/hurricane-milton-leaves-thousands-florida-gas-stations

-without-fuel.

‹Florida Health Justice, “Groups Call on State to Seek Medicaid Disaster Flexibilities in the Wake of Hurricanes Helene and Milton,” Florida Health Justice,

https://floridahealthjustice.org/publications/groups-call-on-state-to-seek-medicaid-disaster-fle

xibilities-in-the-wake-of-hurricanes-helene-and-milton/.

§Disney Connect,

“Walt Disney World Economic Impact: $40.3 Billion Contribution in 2022,”

Disney Connect, https://disneyconnect.com/disneyworld/economic-impact.

*Orlando Weekly, “Disney Says It Has a $40.3 Billion Impact on Florida’s Economy Amid Legal Feud with DeSantis,” Orlando Weekly,

https://www.orlandoweekly.com/news/disney-says-it-has-a-403-billion-impact-on-floridas-eco

nomy-amid-legal-feud-with-desantis-35494292.

‘Benzinga, “Walt Disney Company Shares Fall on Monday: What You Need to Know,” Benzinga,

https://www.benzinga.com/news/24/10/41214963/walt-disney-company-shares-fall-on-mond

ay-what-you-need-to-know.

•Business Observer, “SeaPort Manatee Secures $9.5 Million for Milton Recovery,” Business Observer,