JPMorgan Chase Institute

Weathering the Storm

February 2018

The Financial Impacts of Hurricanes Harvey and Irma on One Million Households

February 2018

A woman running through a storm.

The year 2017 was marked as the most expensive year for disasters in the US, with total damage exceeding $300 billion (NOAA, 2017). Disasters have been growing in both incidence and the losses they inflict. These losses include direct costs such as injury, loss of life, and damage to property; as well as indirect costs such as business interruption, lost wages, displaced residents, and lower tourism.

How do disasters affect households financially? The JPMorgan Chase Institute draws transaction-level data from over one million checking account holders to provide a first-ever daily look at the impacts of Hurricanes Harvey and Irma on financial outcomes. We find that checking account inflows temporarily dropped by over 20 percent, or roughly $400, in the week of landfall for both Harvey and Irma and recovered quickly in Houston, but not so in Miami. Checking account outflows dropped by more than 30 percent, or roughly $500, in the week of landfall and barely recovered 12 weeks after. The changes in spending resulted in welfare losses for some families. Among all spending categories, healthcare dropped the most. Because outflows dropped to a greater extent and for a longer period of time than inflows, families’ checking account balances remained steady or grew in the short run. But these healthier balances may mask incidents of deferred medical and debt payments, as well as anticipated costs to repair homes and replace property. In this sense, in the face of a hurricane, families appeared financially resilient, but may not have been economically resilient.

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Our analysis uncovers five key findings:

Finding One

Total inflows were more than 20 percent, or roughly $400, lower than baseline in the week of landfall. Inflows recovered quickly in Houston, but not so in Miami.

Total checking account inflows
(7-day lagged moving average)

View Text Version Finding One chart

Finding Two

In aggregate, total outflows dropped by more than 65 percent around the day of landfall and by more than 30 percent, or roughly $500, in the week of landfall.

Total checking account outflows
 

View Text Version Finding Two chart


Finding Three

Some spending categories (fuel, grocery, and home expenses) saw increases in preparation for the hurricane. However, in the week of landfall, consumers cut spending across most categories. Healthcare spending dropped by more than 50 percent and still remained lower 12 weeks after.

Finding Four

Debt payments dropped by more than 15 percent in the week when the hurricanes hit and cumulatively remained lower than baseline 12 weeks after Hurricane Harvey and 10 weeks after Hurricane Irma.


Cumulative impact of hurricanes on checking account outflows
(percent deviation from baseline)

Spending

 Home expenses

 Car expenses

 Healthcare



Debt

 Auto loans

 Student loans

 Mortgages



 Total outflows

Source: JPMorgan Chase Institute




Finding Five

Checking account balances were 10 percent, or roughly $670, higher than baseline 12 weeks after Hurricane Harvey and remained steady 10 weeks after Hurricane Irma.

Impact of hurricanes on average daily checking account balance
(dollar deviation from baseline)

View Text Version Finding Five chart



Conclusion

These findings underscore that disasters such as hurricanes disrupt the flow of money and people’s financial routines. The spending category that dropped the most was healthcare spending, leaving open key questions as to whether the slowdown in healthcare spending was caused by a drop in demand or disruptions in healthcare supply. While checking account balances remained stable or grew in the short run, these healthier balances may mask welfare losses, such as incidents of deferred medical care and debt payments, as well as anticipated costs to repair homes and replace property. In this sense, in the face of a hurricane families appeared financially resilient but may not have been economically resilient. Local officials may want to consider strengthening efforts to improve the resiliency of healthcare providers in flood-prone areas. In addition, families living in flood-prone areas could take significant actions to make themselves more economically resilient in the face of a hurricane—notably, building a liquid cash buffer to weather financial volatility and purchasing flood insurance. This report marks a critical step forward in understanding the impacts of hurricanes on people’s financial lives and informing efforts to improve disaster preparedness and response.

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