The staggering one-two punch of hurricanes Helene and Milton has been one of the most destructive on record, obscuring the view of the U.S. economy, Goldman Sachs said.
Property damage estimates vary widely but center at a combined $90 billion, revealed an analyst note published on Sunday, led by chief economist Jan Hatzius. That devastating figure ranks No. 5 on the list of the 10 worst hurricanes since World War II.
In addition to the physical damage, the storms also carried broad “societal footprints” with almost 10% of the population impacted by at least one of them, Goldman said.
Economic data that corresponds to October will be most skewed by the disasters, though some more than others, Goldman added, potentially masking the precise state of market conditions and ongoing trends.
But for certain indicators, “the distortions will be large enough—and their exact size uncertain enough—to obscure the economy’s underlying trend to some degree, but geographic breakdowns and commentary from statistical agencies will offer some clarity on the impact where available,” the note said.
One of the main areas where hurricane-related effects will be felt is in employment numbers.
After weekly jobless claims rose by 14,000 recently in hard-hit states, Goldman sees them climbing further by 5,000 to 10,000 in the upcoming print. They will decline after this week, but filings will likely remain above pre-disaster levels for another month, it added.
Meanwhile, the closely watched monthly payroll report should see a drag of 40,000 to 50,000 jobs from the hurricanes when the Labor Department releases October data early next month, with the unemployment rate ticking up by 0.05 percentage points, Goldman predicted.
GDP will take a 0.3-percentage-point hit in the fourth quarter, but the following quarter will experience a rebound of similar magnitude, analysts said. Industrial production, retail sales, and construction activity will be most impacted.
Elsewhere, inflation usually doesn’t move much after natural disasters, but Helene and Milton could impact the auto market. Some production of parts was interrupted, and higher demand to replace the cars destroyed by the storms could put upward pressure on prices, Goldman warned.
Separately, analysts at Wells Fargo also assessed the economic impacts of the hurricanes, and noted a potential disparity between different states.
Florida, which was primarily hit by Milton, has been more adept at recovering from previous natural disasters and should see fewer knock-on effects from the storm, the note said.
But for areas that were hit hard by Helene, like western North Carolina and eastern Tennessee, the recovery timeline is less certain as their respective regional economies are less diverse and they have higher poverty rates along with lower insurance coverage, Wells Fargo said.
“Along similar lines, many residents could be displaced, and there could also be an out-migration of higher-income residents who are able to relocate,” analysts warned. “Population outflows could spark a decline in home values, decrease household wealth, and lead to an increase in poverty rates.”
