Economic blow won’t be confined to Houston
Damage to vital industries will be felt across the U.S.
The Houston that was battered by Hurricane Harvey is an economic powerhouse whose inf luence reaches far beyond its region, leading many to worry about when its economy will be able to stand up again.
Houston produces the plastic used in everything from sports cars to baby bottles and is part of a lowlying coastal region that supplies nearly a third of U.S. oil-refining capacity. As the fourth-largest U.S. city, with 2.3 million people, it is also headquarters for 20 Fortune 500 companies.
“There’s nothing being sold, nothing being man- ufactured and nothing being shipped in a city with a $500 billion economy,” says Patrick Jankowski, an economist with the Greater Houston Partnership, which promotes regional economic development. “Nothing is happening in Houston except rescues and people watching people get rescued.”
“Greater Houston is a major engine of the U.S. economy,” IHS Markit says. Its port is the second-busiest in the United States. Its two airports handle 26 million passengers a year. And its world- class cancer center processes 13,000 cases a week, many of them booked by patients flying in from abroad.
If it were an independent country, Houston would boast the world’s 23rd-biggest economy, just below Sweden and just above Poland.
Forecasters aren’t yet sure exactly how high the economic damage will go, how far it will spread or how long it will last. The more than 50 inches of rain that flooded Houston left much of the city underwater and its manufacturing base all but immobilized.
Transportation — for residents, employees and businesses — is snarled. Houstonians are trapped in their homes or in shelters, unable to get around because the roads are flooded. The Port of Houston is closed, and flights are still limited at Houston’s George Bush Intercontinental Airport.
Macroeconomic Advisers, a forecasting firm, calculates that economic damage from Hurricane Harvey could shave between 0.3 and 1.2 percentage points off the nation’s economic growth in the July-September quarter. Before the storm, the econ- omy had been expected to grow at an annual rate of about 3 percent from July through September.
“The nation is going to find out how important Houston is to the rest of the economy,” Jankowski says “The dashboard in a Ford manufactured in Michigan or the plastic valve made in Indiana or the piece of costume jewelry in Rhode Island or a case for your computer in California — if it has plastic in it, it’s highly likely the plastic originated in Houston.”
Still, analysts note that the economic losses inflicted by Harvey are likely to be recouped once Houston’s rebuilding begins. And some sectors of the area’s economic base may have been less damaged than initially feared.
Robert Gilmer, director of the University of Houston’s Institute for Regional Forecasting, notes, for example, that the area’s refineries and petrochemical plants mostly escaped serious damage and are likely to be running again within weeks. He says authorities shut them down largely out of an “abundance of caution. … You realize that peo- ple just can’t get to work or that getting them to work is dangerous.”
The economic blow comes just as Houston was beginning to regain its footing after oil prices had tumbled into a freefall in mid-2014, forcing cutbacks in the energy industry.