Hurricanes obscure the underlying trend of the US economy

Estimates of property damage vary widely, but total $90 billion, according to an analyst note published Sunday led by chief economist Jan Hatzius. This devastating figure ranks fifth on the list of the ten worst hurricanes since World War II.

In addition to the physical damage, the storms also left widespread “social footprints,” with nearly 10% of the population affected by at least one of them, Goldman said.

Economic data relating to October will be most distorted by the disasters, although some more than others, she added, potentially obscuring the exact state of market conditions and current trends.

But for certain indicators, “the distortions will be large enough – and their exact extent is uncertain enough – to obscure to some extent the underlying trend of the economy, but geographical breakdowns and commentary from statistical offices, where available, will provide some “Provide clarity on impacts,” the note said.

One of the main areas where the impact of the hurricane will be felt is employment.

After weekly jobless claims recently rose by 14,000 in the hardest-hit states, Goldman expects another increase of 5,000 to 10,000 in the upcoming release. They will decline after this week, but filings are likely to remain above pre-disaster levels for another month, it said.

Meanwhile, the closely watched monthly payroll report is expected to show a loss of 40,000 to 50,000 jobs from the hurricanes when the Labor Department releases October data early next month, with the unemployment rate rising 0.05 percentage points, Goldman predicted.

GDP will suffer a contraction of 0.3 percentage points in the fourth quarter but will see a recovery of similar magnitude in the following quarter, analysts said. Industrial production, retail sales and construction activity will be most affected.

Elsewhere, inflation doesn’t typically move much after natural disasters, but Helene and Milton could have an impact on the auto market. Production of some parts has been paused, and higher demand for replacements for cars destroyed by the storms could put upward pressure on prices, Goldman warned.

Separately, Wells Fargo analysts also assessed the economic impact of the hurricanes and noted possible differences between different states.

Florida, which was hit particularly hard by Milton, has been able to recover better from previous natural disasters and should see less damage from the storm, the release said.

But for areas hit hard by Helene, such as western North Carolina and eastern Tennessee, the timeline for recovery is less certain because their respective regional economies are less diverse and they have higher poverty rates and lower insurance coverage, Wells said Fargo.

“Similarly, many residents could be displaced and there could also be an exodus of higher-income residents who are able to relocate,” analysts warned. “Population migration could trigger a decline in property values, reduce household wealth and lead to an increase in poverty rates.”