Partners (Number 3, 2004)

Florida’s Hurricanes Hard on the Poor
Photo by Bob McMillan courtesy of FEMA

Hammered by four hurricanes last summer, Floridians are now facing a variety of economic challenges. Not since 1964 has the state been hit by multiple storms over a short period. Charley, Frances, Ivan, and Jeanne killed dozens of people and caused billions of dollars in damages, creating the worst hurricane losses since 1992.

Although economists expect the state as a whole to recover quickly, Florida’s low- and moderate-income residents will feel the economic impact of the storms more than most.

Looking at the big picture of Florida’s economy in the wake of the hurricanes, it appears that despite severe damage in a few areas, large-scale economic disruptions will probably be short-lived. Higher insurance deductibles and inadequate flood coverage may have a negative impact on consumer spending in the short-term, but reconstruction outlays will likely make up for any temporary slowdown. Damage to agricultural areas, on the other hand, may take longer to mend. However, often lost in the big picture are the economically vulnerable, who are especially subject to economic disruption caused by natural disasters.

The big picture
According to the Insurance Information Institute (I.I.I.) about one out of every five Florida homes suffered hurricane damage as of October 2004. The insurance industry expects to pay even more than the $15 billion in claims that resulted from Hurricane Andrew in 1992. The I.I.I. anticipates that the total number of claims will exceed one million, surpassing the 700,000 filed for Hurricane Andrew and setting a new record for the number of claims in a short span of time.

Although the total impact from the hurricanes on Florida’s economy is still uncertain, the state’s economy will probably recover quickly. Florida’s strong employment and demographic trends should persist despite storm damage. In fact, during the near term, employment may well increase as workers are added in emergency services, cleanup, and construction.

The net impact of the disasters on consumer spending may also be small. Increased spending for pre-storm stockpiling of emergency goods and repair purchases after the hurricanes may turn out to be more significant than the loss of sales during the storms and their aftermath. The hurricanes’ effects may prove more significant with regard to the pattern of spending than the amount.

The capacity of Florida’s economy to escape long-term damage will depend on how quickly the infrastructure is restored. Expeditious repairs will support the area’s recovery, whereas delayed decisions to rebuild infrastructure or facilities could result in longer-lasting economic damage.

The impact on individuals
The arrival of Hurricane Frances right on the heels of Charley exacerbated the economic woes of individuals affected by the storm. While Florida’s panhandle escaped serious problems before Ivan hit in mid-September, Ivan’s damage was as severe in this area as Charley’s was on the state’s western coast. The final blow came from Jeanne, which came ashore almost exactly where Frances hit along the east coast. A significant number of homeowners are contending with multiple deductibles from damage by separate storms. Most insurance contracts treat each storm as a separate event and thus require separate deductibles.


Insurance payments will probably cover less of the losses from the 2004 hurricanes than for Andrew in 1992. Much of the damage, particularly with Ivan and Frances, was due to coastal and interior flooding rather than wind damage. Over the past ten years, flood insurance has largely been separated from private homeowners’ insurance and covered by federal programs. But many homeowners had not taken the extra step to obtain flood insurance.

In addition, changes in insurance rules since Andrew include the restructuring of deductible payments from a fixed dollar value to a percentage of the total claim, which raises the deductible share of large claims. Unfortunately, many homeowners in rural or less prosperous areas may not have cash on hand for repairs, adding further stress to consumer spending as they save to rebuild. It is this last point that deserves a closer look.

What about the less fortunate?
Estimated recovery periods will be significantly different for low- and moderate-income households. Those with adequate insurance and cash-on-hand will be back on their feet in short order, but for the less affluent, recovery may take much longer.

Last season’s hurricanes had a major impact on some of the poorer regions of Florida. Recent data from the U.S. Census Bureau reveal that hard-hit Escambia County, which includes the city of Pensacola, replaced Miami-Dade in 2003 as Florida’s poorest county. In fact, Escambia County is the 17th poorest county in the nation according to Census figures. Roughly 56,000 people—19 percent of the county’s total population—were below the poverty line in 2003.

Map 1: Percent in Poverty, 2000
Map 2: Hurricane Charley
Map 3: Hurricane Ivan
Map 4: Hurricane Frances
FEMA Public Assistance Work Categories
Category A - Debris Removal
Category B - Emergency Protective Measures
Category C - Road System Repairs
Category D - Water Control Facilities
Category E - Buildings and Equipment
Category F - Public Utility Systems
Category G - Other
Sources: FEMA and Small Area Income and Poverty Estimates, US Census Bureau

The decline in manufacturing employment, especially in the chemicals and paper industries, which typically pay higher wages than those paid for serving the county’s large tourist and retirement communities, has played a role in lowering the cost of living and pushing up the level of poverty.

Although comparable data for all other Florida counties are not available for 2003, the latest complete data set available from the U.S. Census Bureau, from 2000, is shown on Map 1, which indicates the percent of people living in poverty by county. The three maps that follow show Florida counties declared as disaster areas because of the three hurricanes.

In addition to those living in poverty, many Floridians exist just above the poverty line, and depend on fixed incomes or weekly paychecks from jobs in the hard-hit retail and tourism industry. Because the storms destroyed or severely damaged their places of work, a number of low-income wage earners may not be receiving paychecks for some time. Many small businesses will never re-open, and their employees will be forced to find work elsewhere.

Private and government relief efforts will help many, but not all. Thousands of undocumented immigrant laborers risk falling through the cracks of disaster recovery. Some of these workers may fear that they will face deportation if they seek aid, and many others may be unaware that help is available.

In addition, under state and federal guidelines, undocumented workers aren’t eligible for most of the government aid offered to other victims of the disaster, such as loans and cash grants for emergency expenses and repairs to houses or mobile homes. A 2000 study for the federal government estimated that there were more than 111,000 such workers in the Florida counties now designated federal disaster areas.

Mobile homes hardest hit
The pressure less affluent people face in earning a living in the wake of the hurricanes is exacerbated by the fact that many have sustained severe damage to their homes. Many live in mobile homes, and these were more severely damaged than traditional structures.

According to 2000 U.S. Census data, there are nearly 850,000 mobile homes in Florida, accounting for about 12 percent of the state’s single-family housing stock. The Florida Manufactured Housing Association reports that this number may be low, noting that 19 percent is probably more accurate. They also indicated that manufactured homes have accounted for more than one-third of all new single-family home sales in Florida for the past several years.

The suffering and loss experienced by all the affected people of Florida cannot be assessed solely by dollar-figure estimates of damage. The lives lost and disrupted by this season’s hurricanes will be felt for a long time, and the less affluent, many of whom have lost their homes and jobs, will face the toughest road to recovery.

This article was written by Mike Chriszt, director of international and regional analysis in the Atlanta Fed’s Research Department.

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