Hurricane Charley

Storm's economic hit spotty

Economists predict Charley's economic impact in the state to be highly localized and shortlived, with no danger of a "tailspin."

Veteran Florida economist Hank Fishkind, who lives and works in Orlando, knows firsthand about the economic impact of Hurricane Charley.

While his neighborhood had trees down and no electricity after the Aug. 13 storm, his office across town was untouched and air-conditioned.

So Fishkind, who runs a 12-person economic consulting business, left his wife with the chain saw and headed to work last week. His mission: Keep the wheels of commerce turning.

Just as Fishkind was able to return to work quickly, so too were Orlando's major economic engines: the theme parks, convention center and international airport. As a result, the storm's impact on Orlando's economy is expected to be minimal.

Down the road from Orlando in Polk, De Soto and Hardee counties, however, citrus trees were uprooted by Charley's winds and unripe oranges littered the ground, resulting in an estimated $150-million crop loss. In those counties, agricultural jobs could be lost for years and in some cases permanently.

And in the coastal areas of Charlotte Harbor, where older mobile home parks were swept clean by Charley, the storm may have set the stage for redevelopment with higher-priced homes.

Just like Charley, which tore a jagged path through Florida, the storm's economic impact is expected to be highly localized, creating major disruption in some areas of the state and only minor inconveniences in others.

As economists tried last week to calculate the extent of the disaster, with insured losses estimated at $7.4-billion, they agreed on one thing: The strength and diversity of the state's economy will allow it to withstand Charley's blow without any long-lasting damage.

Moody's Investors Service said it didn't expect storm losses to threaten the credit rating of the state or counties affected because of the state's strong financial position and adequate insurance and debt reserve funds.

Richard A. Brown, chief economist for the Federal Deposit Insurance Corp. in Washington, said, "This doesn't throw Florida's economy into a tailspin by any measure."

Like any major natural disaster, Charley was expected to result in an initial hit to employment and income numbers, with businesses and workers forced on hiatus by the storm and its aftermath. That dip will be followed by the boost of rebuilding, which could last as long as a couple of years.

It's that coming boom that had Fishkind's attention last week.

"Obviously the storm hurt people, and there was destruction of wealth if people were not insured," he said. "I don't want to suggest it was a good thing, but from a macro economic perspective, it certainly generates higher levels of economic activity."

Here are how experts see key segments of Florida's economy reacting to Charley.

Spending will rise as insurance companies begin cutting checks for storm-struck homeowners. Banks, many of which hauled portable ATMs into damaged areas last week, will be flush with cash and eager to make loans.

Stores like Wal-Mart and Lowe's will be mobbed with people buying everything from pots and pans to replacement refrigerators. Luxury retailers and high-end restaurants, on the other hand, may see a drop in business as homeowners focus on replenishing the basics.

The strength of consumer spending will depend to a great extent on one big unknown: How much the federal government may bail out homeowners who are on the hook for much bigger out-of-pocket expenditures than victims of previous disasters.

Jack Phelps, FDIC's Atlanta regional manager of the division of insurance and research, said one big difference between Charley and 1992's Hurricane Andrew is that insurers now require homeowners to bear much higher deductibles.

"It could have an effect on consumption if people have to contribute more dollars on their home," he said. "It's sort of up in the air now how much FEMA is going to kick in."

The state's Agency for Workforce Innovation estimates that 48,000 jobs will be permanently lost from businesses destroyed by Charley. That number is part of a larger estimate of about 120,000 positions that will be affected at least temporarily by the storm. The higher number includes vendors such as food distribution centers, which may cut back on deliveries to damaged restaurants.

Warren May, AWI spokesman, said unemployment in Miami-Dade County increased slightly after 1992's Hurricane Andrew but declined within five months. "Then unemployment became substantially lower than prior to Andrew," he said.

Helping to ease unemployment this time will be a $50-million federal grant for hiring cleanup workers. An initial $16.5-million allotment has been set aside for more than 3,600 positions.

Mark Vitner, senior economist with Wachovia Corp. in Charlotte, N.C., thinks the state may be overstating the job loss figure. After analyzing the workforce numbers for Charlotte County, he expects people working in government, health care and chain retailers to be fairly secure in their jobs.

"The one-third of retail workers who aren't employed by chains, however, may have some hardship," Vitner said. "Those stores and restaurants are unlikely to have business interruption insurance, and many may not make it. I see a lot of bankruptcies."

Much of the optimism about employment after Charley stems from the reconstruction that will follow in its wake.

There's just one problem: Florida was straining to meet the needs of a sustained residential construction boom well before the storm. Workers, cement, plywood and steel were already in short supply. Rebuilding from Charley will translate into even higher construction costs. Lumber prices, for instance, jumped to a 10-year high Wednesday. Cement prices had already risen 12 percent this year because of rising demand in Asia and higher shipping costs; prices, as well as delivery delays that ran two to three weeks before the storm, were only expected to increase.

Shortages could occur elsewhere in the state as construction resources are diverted to storm-wrecked areas. New construction starts could be delayed. Developers who have planned projects but no built-in price escalators could see their profits pinched.

"With Andrew, the economy was coming out of a deep recession and real estate was incredibly overbuilt with very high vacancy rates," Vitner said. "In southwest Florida today, residential real estate is not overbuilt. I don't know how it can get that much additional growth because it's constrained by a shortage of labor and supplies."

And it's not just homes that will be vying for materials and workers. Infrastructure work will be a top priority with damaged roads, water mains, power plants and bridges in need of repair. Fishkind, the Orlando economist, said such improvements in an area like Punta Gorda might dramatically change the demographics of an area.

"I think you'll see some outmovement, certainly from the trailer parks," he said. "These are beautiful coastal areas which were settled early, and the storm affords an opportunity to redevelop in a way that's not otherwise possible. From a crass economic perspective, it can be beneficial in the long run."

Charley's immediate impact was to redistribute Florida's tourists: moving them away from the coast to other areas of the state.

Major theme parks in Orlando escaped damage, with all of them reopened by the Monday after the storm. Opening of a new amusement park at Cypress Gardens in Winter Haven was stalled by widespread landscape destruction. The tower at Historic Bok Sanctuary just north of Lake Wales was intact, but its grounds were in disarray.

Hardest hit were Charlotte and Lee counties, with Fort Myers Beach and Captiva Island sustaining the most damage.

To remind folks Florida is still open for tourists, Visit Florida Inc. planned to spend $119,000 on ads in major newspapers this past weekend. FDIC's Phelps said he didn't think it would take much to persuade out-of-staters to return.

"Tourism should come through this okay because one storm maybe seems like an isolated event," he said. "I'd be more concerned if Florida were hit by more storms of this magnitude. Then it could make a dent in tourism."

About 63 percent of Florida's cattle ranches reported significant damage, mostly to fencing and farm structures. Few cattle fatalities were reported, and no dollar figure was put on the damage.

Citrus growers estimated that about 20 percent of the state's crop was lost in the storm, worth about $150-million based on recent prices.

That figure did not include tree loss, replanting costs or repair of equipment, processing and packing facilities.

"This is a very preliminary figure that we fully expect to increase as additional damage is discovered and industry losses are calculated," said Andy LaVigne, chief executive of Florida Citrus Mutual, which represents 11,000 growers.

David Denslow with the University of Florida's Bureau of Economic and Business Research said the advantage for consumers is that the crop loss comes at a time when orange juice supply is high and prices are low.

"It won't do as much to prices as the freezes in the 1980s, when Florida controlled the nation's orange juice supply," he said. "So the good news for consumers is that the price won't rise."

That's not good news for growers, however, some of whom may decide not to replant.

"Every time a grove is destroyed, the farmer reassesses the market," Denslow said. "They've got land, ready for somebody to develop, so speculation and development might occur in some of these counties."

Though some economists speculated growers might receive more money for their destroyed crops from insurance than they would if the crop had gone to market, Casey Pace, a spokeswoman for Florida Citrus Mutual, said that was unlikely.

"Just because growers have insurance, only a few have 100 percent and the deductible is high," said Pace, herself a grower. "A grove would have to be completely decimated to make out on insurance. It's going to be tough."

- Times staff writer Mark Albright contributed to this report. Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.