Hurricane "Milton" may cause severe damage to the US economic data in the short term and bring more lasting pain to the Big Bend area of Florida. The hurricane, categorized as a level 5 on Tuesday afternoon, is expected to hit Tampa and its surrounding areas on Wednesday night. Two weeks ago, Hurricane "Helene" just hit the area and moved north to North Carolina and Tennessee.

The National Weather Service in Tampa warned, "If the storm stays on its current track, it will be the most severe storm to impact the Tampa area in over 100 years." The National Weather Service also stated, "The 'Milton' storm continues to pose a potential catastrophic threat to parts of the west coast of Florida." Predictions show that compared to 'Helene,' 'Milton' will bring higher storm surge to the Tampa area. Biden told reporters that 'Milton' could be 'the most severe storm to hit Florida in over a century.'

These two storms could distort the labor market data for October, suppress consumer spending and economic growth in the affected areas, and drive up food prices.

Citigroup's Chief Economist Andrew Hollenhorst wrote, "The October nonfarm payrolls report could be significantly affected."

Before 'Milton' makes landfall, employers in the region are closing their doors. Disney, Universal Studios, SeaWorld, Busch Gardens, and Legoland theme parks in Orlando have all announced closures on Wednesday. Moreover, in North Carolina, devastated by Hurricane 'Helene,' many workers may still be on leave. This could lead to an increase in the unemployment rate in the October employment report and limit hiring.

JPMorgan's Abiel Reinhar estimates that the impact of 'Helene' on employment may be only a "very small drag," but it could also lead to a loss of over 0.1 million jobs. In comparison, the 2005 Atlantic hurricane season was one of the most severe hurricane seasons in history. In September 2005, the initial value of total US employment decreased by 0.035 million people.

The nonfarm payrolls report for October will be released on November 1, just a few days before the presidential election on November 5.

On Thursday, the number of initial jobless claims as of October 5th will be released, when people may preliminarily understand the potential impact of the storm on the labor market. Economists surveyed by FactSet predict that last week's initial jobless claims were 0.225 million people, unchanged from the previous week. Morgan Stanley's economic team expects 0.235 million applications. The bank anticipates an increase in initial jobless claims related to the hurricane, but indicates that delays in filing for unemployment benefits may become apparent later in hard-hit North Carolina.

However, Ryan Sweet, Chief U.S. Economist at the Oxford Economics, wrote that any decline in the overall employment statistics should be temporary and should not be a reason for the Federal Reserve to consider further interest rate cuts at the November policy meeting.

In addition to the impact on the labor market, Hurricane 'Milton' may also lead to rising costs of commodities including food and energy prices. Chevron announced on Monday that it has evacuated all personnel from the Blind Faith platform and closed facilities in preparation for the arrival of 'Milton.' Chevron's production at other oil drilling platforms in the Gulf of Mexico remains at normal levels.

"Due to abnormally warm sea water, the Gulf of Mexico may continue to generate more hurricanes, so the energy industry may welcome the end of the November Atlantic hurricane season," wrote Louis Navellier, Founder of Navellier & Associates.

Fruit prices may also be affected as Florida's citrus production accounts for 17% of the national total, with the central part of the state being the highest citrus-producing region.

According to the U.S. Department of Agriculture, when Hurricane 'Ian' hit the southwest of Florida in September 2022, the estimated losses of the state's citrus crops were between 0.2 billion and 0.4 billion dollars. However, the agency estimates that with the progress of the season, the losses caused by 'Ian' amounted to as high as 42% of Florida's total production.

AccuWeather's Founder and Executive Chairman, Joel Myers, stated, 'In a few weeks, prices of some vegetables and fruits (like oranges and tomatoes) will rise.'

He said, 'Milton' will be 'one of the most destructive and costly hurricanes in American history.'

This is partly due to the expected path of the storm. If a hurricane hits the densely populated Tampa metropolitan area, it could result in significant property and business losses, leading to reduced spending. According to Myers' calculations, if the economic losses caused by "Milton" exceed $200 billion, these two consecutive hurricanes may have a negative impact on the U.S. GDP in the third quarter.

However, even large hurricanes typically have a short-term impact on the macroeconomy. The storm season of 2005 was one of the most severe in recent years, with Hurricane "Katrina" hitting in late August, followed by Hurricanes "Rita" and "Wilma". According to the Council of Economic Advisers, the combined impact of these three hurricanes in the third quarter of 2008 reduced the U.S. GDP growth rate by 0.7 percentage points, and by 0.5 percentage points in the fourth quarter. Hurricane "Katrina" also disrupted the energy infrastructure, leading to a surge in gasoline prices nationwide.

However, the Congressional Budget Office estimates that due to the rebuilding efforts after "Katrina", the U.S. GDP growth in the first half of 2006 was boosted by an additional 0.5%. Additionally, according to the analysis from the U.S. Bureau of Economic Analysis, the income and employment recovery of those affected by "Katrina" was fairly rapid.

JPMorgan's Reinhar estimates that the impact of Hurricane "Helena" on a state's GDP could be around 1%. The four states most severely affected by the hurricanes - Florida, Georgia, North Carolina, and South Carolina - account for nearly 13% of the U.S. GDP, so Hurricane "Helena" is expected to have an impact of about 0.13% on the annual GDP growth.

"Hurricanes will cause a slight drag on the economy in the early part of this quarter, but the lost output will be recovered in the following months, along with cleanup and rebuilding efforts," said Sweet from the Oxford Economics Institute.

It is worth mentioning that two key battleground states, Georgia and North Carolina, have been hit by hurricanes, and these two states are considered must-win states for Trump, with polls showing equal support for both candidates. Trump, during a visit to Georgia, claimed that emergency relief funds for Americans are dwindling because the money is being spent on immigrants. Biden, on the other hand, accused Republicans of spreading "outrageous lies" about disaster relief funds. Regardless, once Trump's attacks land, voter discontent with post-disaster recovery measures could potentially affect the election results in these two critical states.

Editor/rice