Economists say South Carolina’s strengthening economy should be able to withstand the estimated $1.2 billion impact of October’s unprecedented floods, although the extent of its impact will depend on how many affected businesses and homeowners were properly insured.
University of South Carolina economists Doug Woodward and Joseph Von Nessen presented the school’s annual South Carolina economic forecast Tuesday. The forecast states that current indicators suggest South Carolina will see 2.9 percent employment growth and 4.9 personal income growth in 2016 — far better than what the state has experienced since the 2008 recession.
“In 28 years of forecasting our state’s economy, rarely have I seen our economy in such good shape and with such steady footing,” Woodward said during a press briefing ahead of next week’s 35th Annual Economic Outlook Conference. “The South Carolina economy is strong. It’s resilient even in the face of the historic 1,000-year storms that we experienced this fall.”
Woodward predicted the flood recovery would be on-par with the 1989 impact of Hurricane Hugo. The pair speculated the extent of the damage and disruption caused 4-6 weeks slowdown in business activity. However, they speculated the same disruption would lead to a positive impact in a construction industry that has floundered since the housing crisis.
“In the short-term, this is actually positive for the economy in terms of jobs and income,” Woodward said. “But I want to be clear that will not fully compensate for the wealth losses that individual homeowners and businesses will experience as a result of the flooding in October.”
The two economists said Hugo demonstrated that the recovery would have a less harmful impact in communities where homeowners were insured against flood damage, rather than those which are relying on federal assistance. “The rebuilding effort is largely going to be as a result of insurance claims… it will only add to our growth over 2016.” He added FEMA assistance often does not cover the full loss, meaning uninsured property owners will be constrained in their normal economic impact.
South Carolina’s Department of Agriculture estimates the flood caused $600 million in damage to the state’s agribusiness sector through crop loss and physical damage. USC agricultural economics lecturer Stephen Slice said that accounted for about 5 percent of the sector’s annual gross domestic product in South Carolina. Grain farms and row crops were hit particularly hard, as was the state’s timber industry.
“What survived the drought and heat this summer got hit by the flood. What survived the flood, they’re having a hard time getting out of the field. And what they can get out of the field has low quality,” Slice said. “You’re going to see some farmers going out of business in 2016, either voluntarily or involuntarily.”
Von Nessen said few sectors outside of agriculture will be significantly impacted by the flood damage, particularly in regions outside the hard-hit Midlands and Pee Dee. The forecast predicts income growth should increase from 4.6 percent to 4.9 percent in 2016, as a demand for workers finally begins to match the actual workforce available. “We’ve seen an increasing demand for labor throughout these six years (since end of recession), but we’re just now getting to the point where the labor market is tightening to where we’re seeing upward pressure on wage growth.”
The impact of the October floods will be the topic of this year’s Economic Outlook Conference, which is annually held at USC’s campus in Columbia. The 2015 version will take place from noon-4 p.m. at the Moore Business School’s W.W. Hootie Johnson Performance Hall.