[PDF] Hurricane Harvey and Resilience in Houstons Economy

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Hurricane Harvey and Resilience in

Houston's Economy

Robert W. Gilmer, Ph.D.

C.T. Bauer College of Business

January 2019

Natural Disasters Take Many Forms:

In Houston It Is Floods and Tropical Storms

•Natural Disasters

•Climatological-Drought, extreme temperatures, wildfires •Geophysical-Volcanoes, earthquakes, and tsunamis

•Hydrological-Floods, landslides

•Meteorological-tropical cyclones, tornados

•Houston and the Gulf Coast?

•Floods -1994 Southeast Texas, Memorial Day, Tax Day •Tropical Storms/Hurricanes -Alicia, Allison, Rita, Ike, Harvey •Tornados --are mostly incidental to bigger storms

Harvey: One More Tropical Storm?

•This was another tropical storm -just less wind, more water. MUCH more water. It was a 1000-year flood event with no known precedent in North America according to the University of Wisconsin's Space Science and Engineering Center.

•These storms do enormous property damage. Harvey shrank collective balance sheets across Texas and Louisiana by $125.0 billion. In Houston, about 41,400 Houston homes were left with major damage or destroyed, and 300,000 vehicles totaled. Insurance can only partly recoup these losses, and losses are written off the balance sheet

•Tropical storms are usually neutral or good for most current economic measures like employment, income, or output. These are flows on the income statement, not property losses

•For a hurricane, we lose worktime as we shelter, but we come out to meet an intense mini-economic boom that quickly gets underway -and then fades just as quickly

•The recovery boom is led by spending and construction. Spending is for new carpet, furniture, wallboard, cleaning supplies, etc. Construction is for clean-up and repair of damaged structures This surge usually offsets losses to the shelter period

•We are poorer because of property losses, but six months later the effect on employment, income and production is usually near neutral. Continuing economic effects are too small to register in an economy of 6.7 million people

Why Would Economists Think This?

Because Many Studies Support it

•Based on the 1964 Alaska earthquake, Dacy and Kunreuther (1969) concluded the region's inflow of capital from rebuilding produced net benefits for the economy; Friesema and others (1979) found this true for the Yuba City floods, Hurricane Carla, and tornados in Conway, Arkansas and Topeka, Kansas

•Guimaraes, Hefner, and Woodward (1973) examine gains and losses from Hurricane Hugo in South Carolina. Changes in regional income were neutral after a year, despite a surge in activity in specific sectors

•Sarmiento (2007) uses a panel of U.S. floods to show how they disrupt local employment, but recovery comes within a year. Belasen and Polachek (2009) show income levels rise following a disaster

Goals for the Day

•How could a natural disaster be a small plus or minus for local employment or income? After all the damage?

•Storm damages have been rising rapidly in recent years. Why? What factors might figure into these growing damages?

•Do the little-economic-impact rules apply to flood-prone Houston? Even to Harvey? We look at the short-term impact of eight major storms that have affected Houston since 1983: Alicia, the 1994 floods, Allison, ... ,etc.

•We will take a deep dive into Harvey impacts: oil and gas, the service sector, commercial real estate, apartments and single-family housing

•We at least give some thought to public policy from our findings: infrastructure needs, planning for disaster, use of police powers during and after the storm, land-use restrictions, and flood insurance

More Storms? Bigger Storms?

Or Just Bigger Cities?

StormYearDamagesPeak CategoryComments

Const $2017Current $

Katrina2005171.231255infrastructure failure

Harvey2017125.001254storm stalls, infrastructure failure?

Maria201791.6091.65infrastructure failure

Sandy201281.7968.73hits large east coast metro areas

Andrew199265.0027.35powerful cat 5

Irma201764.8064.85powerful cat 5

Ike200846.34384infrastructure failure in Galveston?

Ivan200438.9626.15powerful cat 5

Wilma200537.5327.45powerful cat 5

Rita200525.3418.55powerful cat 5, evacuation issues

Charley200425.2216.94

Michael201824.39254

Hugo198923.109.474

Georges199818.379.374

Irene201117.3214.23

Florence201816.2916.74

Matthew201615.7315.15

Frances200415.0710.14

Allison200114.668.5Trop StormSmall storm stalls over Houston

Agnes197213.132.11

Camille196913.001.435

Betsy196513.001.434

Floyd199912.266.54

Mitch199811.926.085

Jeanne200411.857.943

Fran199610.4253

Gustav200810.138.314

Opal199510.004.74

Fifi197410.001.82

Alicia19839.0933Houston 120% bigger at time of Harvey

What Drives Rapidly Rising Storm Damages?

•Some of the most expensive storms were the result of storms that overcame infrastructure in New Orleans, Puerto Rico, and perhaps Houston in both Ike and Harvey

•Damage increases are mostly to structures. Deaths see less frequent spikes over time, but decline in number

•Structural damages continue to grow

•The previous table was adjusted for cost of rebuilding over time •We must allow for the rising growth of the population/economic value of region that is hit

•Storm damages are not usually specific to one location, but often spread over many cities and states

•The power of the storm

•A list of major damages is dominated by Category 4 and 5 storms •Is the number and power of storms increasing over time?

Differences from Normal Precipitation:

Global and U.S., 1901 to 2015

-2.5-2-1.5-1-0.500.511.522.5 1901
1906
1911
1916
1921
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011

Global Annual Difference From Normal

Precipitation, Inches

-6-4-20246 1901
1906
1911
1916
1921
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011

U.S. Annual Difference From Normal

Precipitation, Inches

NOAA via EPA

Evidence That Extreme Precipitation Events Are

Spreading Into More of the U.S. Since 1980s

0510152025

1895
1900
1905
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015

Unusually High U.S. Precipitation

% land Area Affected

0510152025

1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015

Extreme U.S. Precipitation

% Land Area Affected Heavy line is 9-year averageHeavy line is 9-year average

NOAA via EPA

North Atlantic Hurricanes Striking the U.S. Have

Averaged About Two Per Year for Decades

0123456789

1860
1863
1866
1869
1872
1875
1878
1881
1884
1887
1890
1893
1896
1899
1902
1905
1908
1911
1914
1917
1920
1923
1926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
North Atlantic Hurricanes 10-year average, 1860 to present

Striking USMajor US StrikesNorth Atlantic HurricanesLinear (Striking US)Linear (North Atlantic Hurricanes)

Hurricane Data Base, NOAA

Atlantic Storms Getting More Powerful?

Not If You Allow for the Number of Storms

020406080100120140160

1860
1867
1874
1881
1888
1895
1902
1909
1916
1923
1930
1937
1944
1951
1958
1965
1972
1979
1986
1993
2000
2007
2014

Accumulated Energy,

1860
-2016, 10-yr averages

Accum EnergyLinear (Accum Energy)

0510152025303540

1860
1867
1874
1881
1888
1895
1902
1909
1916
1923
1930
1937
1944
1951
1958
1965
1972
1979
1986
1993
2000
2007
2014

Energy per Storm, 1850-2014

10 -yr averages

Energy.StormLinear (Energy.Storm)

Hurricane Data Base, NOAA

Are U.S. Hurricane Landings Getting More

Powerful Over Time?

y = -0.0205x + 968.79

R² = 0.009

88090092094096098010001020

1851
1859
1869
1876
1882
1887
1895
1903
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