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An analysis by Dallas Fed economists found that as Texas warms, the state's economy slows.
This year's heatwave could cost Texas' economy $24 billion, or reduce the state's nominal gross domestic product (GDP) by about 1 percentage point in 2023, economists said in a report released Wednesday. I calculated it in a book.
Using data from the past 20 years, economists found that, in general, economic growth in Texas slowed by 0.4 percent for every 1 degree increase in summer temperatures. This result is consistent with previous economic research that found that summer heat tends to reduce business activity.
The analysis found that the state's economy is twice as affected by heat as the rest of the country, as Texas typically has some of the hottest summers in the nation. As temperatures rise, the negative effects on the economy will become more pronounced. For example, warming from 70 degrees to 71 degrees has less impact than warming from 80 degrees to 81 degrees.
Summer heat is becoming increasingly extreme. Climate change is making heat waves more common and more intense in Texas than ever before. The effects on human health are well-documented, and heat is one of the most deadly forms of weather, typically killing more people each year than hurricanes, tornadoes, and floods. . At least 97 Texans died from heatstroke in Texas this summer, according to the Texas Department of State Health Services (a number that is almost certainly an underestimate).
On the economic front, the heatwave has kept customers at home rather than going out to shop or eat, with some planning vacations somewhere cooler than Texas. Crop yields may decrease and construction projects may be delayed.
“The economy is going to have to adapt,” said Anil Kumar, economic policy advisor and senior economist at the Dallas Fed and one of the authors of the analysis. “Communities can adapt by adopting more technologies to increase sustainability and other ways to mitigate the effects of heatwaves.”
Heat also affects business productivity, with a quarter of companies responding to a Dallas Fed survey in August citing lower customer demand and lower labor productivity. They reported a decline in revenue and production. The state's leisure and hospitality, transportation and retail industries were hardest hit.
Industries where employees are often outdoors, such as the oil and gas industry and construction, experienced a notable heat-related slowdown in job growth.
Economists found that hot summers have a clear negative impact on the state's economy, but rising temperatures due to climate change could actually boost the state's economy in the spring and fall. If the increase were perfectly even throughout the year, the boost could be greater in some years. Bad effects of summer.
The positive effect on growth during these seasons may be because warmer springs allow farmers to plant rice earlier in the season, increasing property sales. Kumar also said that as the summer has become more extreme, Texas businesses may have already shifted their operations to the spring and fall.
