Hurricane Harvey’s effect on the Economy

It is obvious that the tragic event of Hurricane Harvey has left thousands of families devastated, as it has destroyed billions of dollars’ worth of homes and properties. What is not so obvious, however, is the effect it will have on the U.S. economy. Although it is extremely difficult to accurately predict the impact a hurricane such as Harvey will have on the economy, economists are breaking down the impact by economic indicators.

According to the Commerce Department’s Bureau of Economic Analysis, Texas accounted for 8% of the total U.S. economic output with a GDP of $1.5 trillion in 2016. The cost of the hurricane is estimated to be somewhere between $70 to $100 billion.

Inflation is an important indicator of Harvey’s impact, exemplifies through the increase of gas prices in Houston. According to the AAA, the average gas price has increased from $2.35 to $2.66 a gallon. This number is expected to continue to increase more before settling down. The increase in inflation will have its own impact on consumer spending, forcing people to spend less money on secondary items.

Hurricane Harvey is expected to have an impact on initial jobless claims, or people filing for unemployment for the first time. Historically, we have seen an increase in claims about 2 weeks after a massive hurricane, such as Katrina in 2005 and Sandy in 2012. This could account for all the people who lost their jobs because of companies shutting down or working part time due to weather conditions.

However, at a more macro level, Harvey’s impact on the economy may not be as bad as it sounds. According to Goldman Sachs, the rebuilding of homes and properties in the future could possibly offset the damage done to the overall economy. Although in the short run it may seem harmful, in the long run, properties are going to require rebuilding. This will motivate construction companies and their workers to migrate to Houston for job opportunities.

It has only been a few weeks since the hurricane struck Houston, therefore only allowing room for predictions about the future of its economy. It will be interesting to see how the impact of this hurricane will compare to other historical hurricanes in the past. Will Harvey be the costliest? Will it have a larger negative impact on the economy, or will rebuilding efforts balance it out? We have yet to find out.

References:

http://www.foxbusiness.com/features/2017/09/07/how-hurricane-harvey-will-ripple-through-u-s-economy.html

http://www.businessinsider.com/hurricane-harvey-economic-impact-2017-8/#the-cost-of-harvey-1

 

 

 

Retail Realignment – Good or Bad?

Having been around for centuries in the United States, the retail industry is no stranger to the economy we live in today. The industry is constantly experiencing ups and downs, depending on the styles, trends, and brands that are “in” at the moment. However, the industry is now experiencing something different – a revolutionary shift to e-commerce at a rapid pace. Recent studies show that just over half of the American population today prefers shopping online. I mean, who even likes spending hours at a mall just to find one t-shirt?According to the U.S. Bureau of the Census, as of this quarter, e-commerce retail sales make up 8.9% of total retail sales. Overall, this percentage has increased by 13.8% since 2000. As a result, retail companies are shutting down store locations, laying off employees, and some are even going under.

Just like almost any other advancement in technology, this disruption in the retail industry has had a direct effect on employment. According to The Atlantic, major department stores, such as Macy’s, have “shed nearly 100,000 jobs” from October 2016 to April of this year.

So how is it that thousands of jobs are being shed as a result of this transition, but yet we are seeing an increase in the number of jobs and wealth in America? Economist Michael Mandel believes that this shift towards online retail has actually had a positive impact towards employment. His studies show that the e-commerce market has created more jobs than the total lost jobs caused by the transition. But wait, there’s more! – These new jobs that are being created by the e-commerce sector are paying much higher wages than traditional retail jobs.

The statistics generated by Mandel assume that “general warehousing” jobs are directly correlated with retail sales. He uses the example of Amazon to justify his argument by saying that they employ 12,000 employees, which includes warehouse workers, rather than the 2,640 that the Bureau of Labor Statistics states, which does not.

Mandel might be up to something with his optimistic analysis, but it is truly very difficult to measure the direct effect e-commerce has had on employment. There are just way too many aspects, making it too complex to come to an accurate conclusion. However, it is always great to hear that we might actually be heading towards the right direction. Many people would argue – What will happen once robots start replacing humans in these warehouses? I guess we’ll just have to wait and see!

 

References:

https://fred.stlouisfed.org/series/ECOMPCTSA

https://www.bigcommerce.com/blog/ecommerce-trends/

https://www.theatlantic.com/business/archive/2017/04/the-silent-crisis-of-retail-employment/523428/

 

Social Media & the Economy

There are billions of social media users around the world, as this number continues to increase. In 2017, almost everything is, or can be, done over the Internet; whether it is wishing your cousin in Australia a Happy Birthday, spreading awareness about your lost dog, researching about why your stomach may be hurting, or even exposing your knowledge and credibility in your craft.

Most importantly, social media has played a huge role in revolutionizing the way businesses operate. Brands are now able to expose themselves right in front of your eyes no matter where you are.

You can be in bed, scrolling through your Facebook timeline, and potentially come across an advertisement that sparks your interest. After about 4 clicks, you can purchase that product and have it arrive at your doorstep as soon as the next day. More importantly, you just generated business for that company while you were in bed.

Businesses are able to use social media to learn more about themselves. Reviews, feedback, and consumer research has never been easier, allowing businesses to spend less money on what is not working and pump more money into what is. This is so important for businesses to pay attention to and utilize, because it is something that can potentially take your company to the next level.

This magical ability through the use of social media has sparked a new wave in the economy. Entrepreneurship is at its highest peak of popularity, because now you can legitimately operate your business from your living room – all you need is a laptop.

This has even impacted the decrease of the unemployment rate. The word “unemployment” has lost a lot of its weight, partially due to the easily accessible online market places; where you can buy and sell almost any item to make money.

“Freelancers” have also gained tremendous popularity with the rise of social media. Let’s say you had enough of your boss so you quit your job, but you haven’t found a job yet, or you recently got laid off and are in the middle of a job hunt: During this time, you can now list your skills and experiences online and find contract jobs to work on for money until you find another job. This may even work out better for you, and the autonomy could be the cherry on top!

Social media has really disrupted the economy – for the better. There is so much opportunity in the world, and the Internet has literally placed it right in front of your eyes.

 

References:

http://ageconsearch.umn.edu/bitstream/162500/2/SAEA%20Econ%20Impacts%20Paper%202014%20Submitted.pdf

https://www.theatlantic.com/technology/archive/2010/10/is-social-media-driving-the-economy/64780/

https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/quora/2017/08/02/how-does-social-media-influence-the-economy/&refURL=https://www.google.com/&referrer=https://www.google.com/