Hurricanes' Devastation Could Reduce 3rd Quarter GDP by 1%

As we see Irma devastating the west coast of Florida today, Bill McBride points out a Goldman Sachs economic note that looks at the potential impact of the hurricanes on the US economy. Because of the devastation in Houston and southeast Texas, Goldman has already reduced its estimate for 3rd quarter GDP by 0.8% and warns that that estimate could potentially fall even further, perhaps dropping by 1% or more in total.

Here in Connecticut, we have seen gas prices rise by about 60 cents a gallon in the wake of Harvey.  Nationally, we have seen a rise in unemployment claims and a drop in auto sales. Those trends are likely to get worse when we see the damage that Irma has left in its wake. In addition, Hurricane Jose is coming in right behind Irma and its current forecasted path has it hitting the New York metropolitan area sometime in the middle of next week.

As the Goldman note states, “we expect this weakness to reverse over the subsequent three quarters, more than recouping the lost output.” Why? Because the reconstruction effort will create jobs and increase economic activity. This is the truth behind infrastructure spending, something that the Republican party does not seem willing or able to understand.

GOP opposition to infrastructure spending during the Obama years was due to its determination not to allow Obama to succeed. But now, with both houses of Congress and the White House in Republican hands and Democrats as willing partners, the GOP is spending all their time trying to rip health care away from over 20 million Americans and trying to pass massive tax cuts for the rich and its business cronies. Meanwhile, large swaths of this country, much of it in Trump country, still suffers from underemployment.