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Weather Costs US Economy Hundreds of Billions Annually

By By Meghan Evans, Meteorologist
June 30, 2011, 4:34:01 AM EDT

"...during a year with extreme weather, people all across the country have to dig even deeper in their pockets due to a bigger hit on the economy."

A recent study, released in the June issue of the Bulletin of the American Meteorological Society and supported by NSF and NOAA, looked at how much the economy is affected by weather annually. The research was led by scientists of the National Center for Atmospheric Research (NCAR).

The study's conclusion: even minor changes in the weather play a major role in the U.S. economy.

"The weather has a significant impact on every sector of the economy in every state of the U.S.," according to Jeff Lazo, an NCAR scientist and the lead author of the research released.

Not only can severe weather events (floods, tornadoes, blizzards etc.) impact the economy, less severe weather events can as well. Hot weather and cool, rainy days can also have a major effect on the economy. Weather plays a role in every aspect of the economy from commerce to travel to agriculture to manufacture.

Supply and demand of the different sectors of the economy are effected by the weather in very complicated ways.

"The economy can be hurt and helped by the weather," said Expert Senior Meteorologist Ken Reeves.

"Leaving aside the personal devastation that takes place during an extreme weather event," Reeves added, "extreme weather can lead to high damage costs, but contractors and suppliers benefit by repairing the damage and supplying the material to repair the damage."

There are many examples that exemplify the two-sided impact of the weather on the economy.

"A snowstorm in Colorado can attract skiers from Texas and the Southeast, which would be a positive," said Lazo.

"However, increased heating costs and impacts on transportation caused by the snowstorm would be negative. Agriculture could be impacted in both positive and negative ways. The snowpack provides a water supply, but if it melts rapidly and causes flooding, it can be a major problem," added Lazo.

Another example is a heat wave. The demand for electricity goes up as people turn on air conditioners. However, sales of fans and air conditioners and tickets for water parks go up.

According to the NCAR scientists leading the research, the influence of routine weather variations on the economy cost as much as 3.4 percent of the entire U.S. gross domestic product. The conclusion was made after the researchers examined 70 years of weather records through 2008.

Given the study's findings, the yearly economic cost of the weather was found to be $485 billion, plus or minus $240 billion.

While this first study does not include the severe weather of spring of 2011, another recent study focused solely on the impact of the severe weather this past spring on the economy.

An independent study performed by Aon Benfield, an insurance company, found that the severe weather outbreaks from spring 2011, will cost the insurance industry alone an estimated $15 billion. The study, which spanned April and May, surveyed five severe weather outbreaks. One of these outbreaks was the late-April tornado outbreak, in which an EF-5 tornado tore through Tuscaloosa, Ala. The notorious twister is the deadliest on record in the U.S.


The Aon Benfield study went on to compare the $15 billion of insured losses to the annual average over the past 20 years, which is $5.5 billion. That means this year's losses alone are close to three times the average yearly insurance loss over the time period from 1990-2010.

It is important to note that the losses of the insurance industry do not include the damage repair costs that were not covered by insurance. The total economic costs of the severe weather in the spring of 2011 are estimated at $21.65 billion, according to Aon Benfield.

NOAA released a statement in the middle of June claiming that 2011 is among the most extreme weather years in history. The evidence the organization uses is that in half a year, there have already been eight weather-related disasters in the U.S. that have each caused more than $1 billion in damages.

Even during a year of "tame" weather, the economy is largely impacted by the routine variability of weather, but during a year with extreme weather, people all across the country have to dig even deeper in their pockets due to a bigger hit on the economy.

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