Natural disasters and deterrence of economic innovation: a case of temporary job losses by Hurricane Sandy

Quantifying many natural disasters economically is a global concern. Even in the U.S., economic damages stemming from natural disasters are experienced annually. Unexpected natural disasters result in various economic and business management disruptions. Especially, complex inter-industrial and inter-regional connections in established economies may experience much larger impacts by a disaster, and hence, the economic and business losses need to count not only the direct, actual lost value of business during the disrupted period, but also the indirect, latent lost value that would not have occurred. In the U.S., severe economic damages generated by the two hurricanes that hit the Gulf of Mexico in August 2005 were recorded in the history; however, this hurricane-generated economic loss is still being experienced. Hurricane Sandy occurred in 2012 is recorded as one of the largest storms ever to mash American territory. The hurricane-caused disruptions of metro built environments and natural environmental systems demonstrated how fragile New York City (NYC) and Long Island areas are from hurricanes and storm surges. This promptly generated a new discussion of building coastal barriers surrounding the shorelines of the areas, expecting to minimize the destructive risk from a similar event in the future. An issue that was not seriously explored in this discussion is how to account for economic damages more extensively and accurately. Majority studies of estimating economic damages rely on governmental reports that mostly focus on the magnitude of building losses directly damaged or on speculations about future impacts on the area already damaged. However, when considering inter-industrial and inter-regional economic connections which are becoming more complicated, accounting for the indirectly connected ripple impacts is important in the market economies because recovery from economic damages requires an understanding of resilient paths of the lost business production. This study provides a procedure to estimate a type of interconnected economic damages based on the National Interstate Economic Model (NIEMO) and the temporarily lost jobs using Census data during the first 4 days caused by Hurricane Sandy. By tracing Sandy’s moving path from Florida to New Hampshire, it was found that Sandy had brought another tragedy mainly to the NYC and Long Island areas, reaching $2.8 billion in 4 days with 99% of the loss occurring in the last day of Sandy. Furthermore, the national impacts attained $10 billion losses according to the NIEMO analysis. Technological innovation that may support various mitigation and prevention policies would reduce the economic losses, expediting recovery to the normal status of U.S. economy.