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Home Agricultural: Farming, News & Trends California Wildfires: Economic Losses May Hit $250B-$275B

California Wildfires: Economic Losses May Hit $250B-$275B

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California wildfires

“Driven by winds exceeding 40 miles per hour, the fire quickly consumed about 200 acres of land and continued to spread at an alarming rate.” Since last week, multiple wildfires have continued to ravage the Los Angeles area in California. On the 13th, the region issued another red flag warning for strong winds, further complicating firefighting efforts. As of now, at least 25 people have died due to the wildfires, and the death toll is expected to rise. The economic losses caused by the disaster are also soaring.

Losses May Reach $250 Billion

The economic loss figures related to this massive disaster have started to be released. As of the 14th local time, the U.S. meteorological service AccuWeather updated the estimated economic loss from the California wildfires to between $250 billion and $275 billion. It’s important to note that this number far exceeds the economic losses caused by the 2023 Hawaii wildfires ($13 billion to $16 billion) and the damage assessment for last year’s Hurricane Helen ($225 billion to $250 billion). It also surpasses the losses from the active wildfire season in the U.S. in 2020.

As for when the wildfires will be extinguished, Michael Varah, a senior researcher at Stanford University, told USA Today on the 13th that the end of the fire season will be marked by rainfall. “Nature decides when the fire season ends in California and other places.”

Even after the wildfires end, the Los Angeles area will face a long recovery process. AccuWeather explained that its wildfire damage statistics cover multiple aspects, such as property damage, business losses, damage to infrastructure and utilities, financial impacts from evacuation orders, long-term costs of rebuilding or relocating homes in densely populated areas, post-disaster cleanup and recovery costs, costs for emergency shelters, short- and long-term medical rehabilitation costs for injured persons and those suffering from smoke inhalation, wage losses and housing relocation costs for locals, as well as losses caused by local businesses shutting down, layoffs, and job cuts.

JPMorgan economist Abigail Reinhart told Reuters that the Los Angeles wildfires are likely to become the most expensive climate disaster in U.S. history, both due to their scale and the high value of the residential real estate destroyed. AccuWeather’s chief meteorologist, Porter, reminded that the affected areas in California include some of the top luxury residential neighborhoods in the U.S., where median home prices exceed $2 million. The latest data from Wells Fargo shows that the number of insurance claims related to the wildfires is steadily rising, currently totaling $30 billion.

Agriculture and Tourism Struggling to Survive

Farmers in Southern California are also facing the possibility of devastating crop damage. From orange orchards to vineyards, California, known for its fertile land and rich yield, is now seeing these wealths turn to ash in the flames.

Julia Zosian’s family has lived and worked on the Zosian farm in Altadena, which was purchased by her grandfather in the 1940s. However, after the wildfires ravaged the land, 39 acres of the 40-acre farm were reduced to ashes, and the family not only lost their livelihood but also their home. The smoke “poses a threat to people, animals on the ranch, or even the crops themselves,” ABC News reported.

Alba Velasquez, Executive Director of the Los Angeles Food Policy Council, told ABC that around 24 farms have been affected by the wildfires, and the number is increasing daily. Additionally, dangerous weather conditions and poor air quality have drastically reduced foot traffic at local farmers’ markets, significantly cutting into sales. One farm owner told ABC, “This will have long-term economic impacts. We rely on these farmers’ markets to sell a large amount of produce.”

Tourism is also suffering heavily. The ongoing wildfire threat has disrupted travel plans for thousands of visitors to Los Angeles and Ventura counties. These two regions are known for their scenic beauty and abundant attractions, including Hollywood and Disneyland. However, many parks, hiking trails, and highways have been closed, leading to a sharp decline in tourist numbers. Businesses, including hotels and outdoor activity providers, are also grappling with operational challenges amid the crisis.

Although California’s tourism industry is no stranger to the challenges posed by natural disasters, and some attractions have already reopened, Travel and Tour World, an American travel magazine, states that the frequency and intensity of such disasters are causing a ripple effect across the entire industry. Long-term closures and safety risks may diminish the appeal to future potential travelers, which could affect the economic recovery of the affected areas. The state’s tourism board is actively coordinating with local agencies to mitigate these impacts and promote safe travel options.

Heightening the Already Uncertain Economic Situation

Reuters, on the 14th, quoted experts analyzing that the California wildfires may exert some pressure on U.S. national economic growth in the short term. The massive property damage and major disruptions to the labor market could lead to higher inflation in the U.S., slowing economic growth, and creating a “moderate brake” in the job market.

Abigail Reinhart noted that, specifically, costs related to rent, construction market supply, and housing labor in the affected California areas will rise. Goldman Sachs economists believe that these wildfires could reduce the U.S. economic growth rate by 0.2 percentage points in Q1 this year, and could lead to a reduction of 15,000 to 25,000 new jobs in the U.S. in January.

Economists quoted in the report believe that the overall impact of the wildfires on the U.S. national economy is relatively limited. However, with Trump set to return to the White House for his second term, his upcoming economic policies already introduce significant uncertainty for the U.S. economy. The economic losses from the California wildfires further exacerbate the already highly uncertain economic situation.

As climate change intensifies, extreme weather events are becoming more frequent. The U.S. experienced 24 climate disasters last year alone, and disasters like last year’s hurricanes are still not fully resolved. Now, with California’s catastrophic wildfires, global attention is focused. As the world’s largest emitter of greenhouse gases, balancing economic development and climate response will likely become a long-term challenge for the United States.

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