As floodwaters surged, money flow dwindled
A study focusing on bank transactions shows just how hard Hurricane Harvey walloped the Houston area
A new study that relies on bank transaction data details how hard Hurricane Harvey hit the finances of Houston residents and businesses, and rippled across the region’s economy.
As Harvey's floodwaters swept through Houston, local businesses closed their doors and stranded workers lost income, forcing families and individuals across the region to cut daily expenses, defer payments on student loans and mortgages and spend far less on medical care. Researchers for JPMorgan Chase Institute, the research arm of the New York bank, analyzed data collected from 500,000 local customers, and found large drops in loan payments, spending and money going in and out of bank accounts as floodwaters paralyzed the region.
The study, which looked at the three months following the record-setting storm, also tracked the area’s rebound as insurance payouts and disaster aid poured into the region and rebuilding got underway.
The average amount of money flowing into a Houston bank account dropped dropped 23 percent, or $447, in the week in late August that the historic storm destroyed homes, flooded cars, and put people out of work, the researchers found. The Houston area temporarily lost some 25,000 jobs as businesses shut down in the immediate aftermath, according to the U.S. Labor Department, and consumer spending collapsed.
"A 20 percent drop is very significant for most people," said Diana Farrell, chief executive of the JPMorgan Chase Institute, in an interview. "And three months isn't a short amount of time when you're under financial strain."
As people cut spending, withdrawals from the average bank account fell by more than one-third, or $562, the study said. Health care spending fell the most in Houston, plunging 65 percent compared with the
week before Harvey hit the city.
It was followed by reductions in spending on car expenses (down 50 percent), restaurants and entertainment (down 46 percent), retail ( down 41 percent), home expenses ( down 38 percent), fuel (down 31 percent), travel (down 15 percent) and groceries (down 7 percent).
Houston residents also put off loan payments, which fell 15 percent overall. Student loan payments declined 9 percent and mortgage payments fell 12 percent.
In the 12 weeks following the storm, JPMorgan said, spending recovered, with home expenses surging 33 percent as consumers spent money to repair their houses. Auto spending rose 13 percent three months after the storm passed, and fuel consumption and retail spending both rose 7 percent.
For Houston's small businesses, cash balances dropped 7.4 percent. Money flowing into accounts slid 63 percent and funds going out fell 54 percent. Cash balances recovered within two weeks, however, growing the quickest for construction, repair and maintenance firms.
"Small business retrenched pretty significantly because they had big losses," Farrell said. "But they managed to end up with balances that were higher."
Local commerce also suffered at first. Spending in Houston dropped 7.5 percent in August compared with the same month a year before. But in the month after the storm, spending in September rose 9.3 percent above the same month the year before.
"It's important to note this recovery does not necessarily indicate a recoupment of all financial losses following the hurricanes, but rather a return to normal spending level patterns," JPMorgan said.