Related Links

• The Devastation of Hurricane Helene: The Fifth District
• Hurricane Helene: What We Are Learning
• The Impact of Hurricane Helene on Fifth District Businesses

Transcript

Tim Sablik: My guests today are Bethany Greene and Jason Kosakow. Bethany is a regional economist in the Charlotte branch of the Richmond Fed and Jason is the Richmond Fed's survey director. Thank you both for joining me.

Bethany Greene: Happy to be here.

Jason Kosakow: Always great to be here, Tim.

Sablik: In late September, Hurricane Helene brought widespread devastation across the southeast United States. In the Richmond Fed's Fifth District, communities in upstate and western South Carolina, western North Carolina, and southwest Virginia were subject to strong winds, heavy rain, and flooding.

You have both written about the effects of this storm in our district, drawing on economic data, insights from our regional contacts, and surveys of businesses. On today's shows we're going to discuss what you've learned in the aftermath of the hurricane.

Bethany, could you start by giving us an overview of the Fifth District communities that were hardest hit by Hurricane Helene?

Greene: Hurricane Helene impacted a lot of our different Fifth District communities. Over 80 counties in our district were declared FEMA designated areas, which means they were eligible for disaster assistance.

The western North Carolina region saw a particularly severe impact due to flooding and landslides that completely uprooted homes, businesses, [and] transportation infrastructure. This was especially devastating for communities located near the rivers that overflowed due to the rainfall. Areas like Chimney Rock, Swannanoa, [and] Black Mountain definitely sustained severe damage.

Sablik: What are the main economic industries in these communities and how were those affected?

Greene: Many communities in western North Carolina — because of their beautiful outdoor amenities, their arts and culture scene — have a really large leisure and hospitality presence. Although it's not necessarily the largest industry by employee count, many businesses in the region have a connection to the tourism industry.

In terms of the impact, a lot of hotels, attractions, and businesses sustained physical damage and had to close temporarily. Other tourist areas like the River Arts District in Asheville sustained severe damage, and it's now more a question of rebuilding than reopening.

Even for businesses that didn't sustain major physical damage, revenues have been impacted due to a sharp decline in tourist traffic. You can imagine how retailers that sell outdoor equipment are currently doing. We have popular hiking trails, including the Appalachian Trail and the Mountains-to-Sea Trail, that had to close temporarily. The overall impact to business activity is worsened by the fact that October is a really popular month for tourist travel in the region.

There's also a really large manufacturing and transportation, trade and utilities presence in our district. As I mentioned before, the storm damaged a lot of transportation infrastructure, which caused delays in the transport of goods and prevented employees from being able to commute to work.

Another thing to note is the storm damaged water systems. That means potable water was unavailable for a time. You can see how that would be an issue for food and beverage production. For example, we have a lot of breweries in Asheville who had to find other, more costly ways to access clean water, which has impacted their production and profitability.

Sablik: Jason, in the latest Richmond Fed business surveys you asked firms across the Fifth District how they were impacted by the hurricane. What response did you get from businesses in these regions that were most directly affected by the storm?

Kosakow: Hurricane Helene made landfall on Sep. 26 and our surveys were fielded from Oct. 24 to Nov. 20. What we found was in counties that were directly affected by the hurricane, over 60 percent of businesses reported some impact. However, when we zero in on North Carolina and South Carolina, that percentage increases to over 70 percent.

Twenty-eight percent of businesses reported supply chain disruptions. So, if you think about roads becoming inoperable, you're not able to import and export goods to and from your business, which has also downstream effects. Additionally, 28 percent of businesses reported a reduction of operating hours, which makes sense. If you lose power or utilities, you're not able to physically manage your business. A little over a fifth of firms reported damage to their physical property or assets.

Businesses that were affected sustained multiple types of issues, so the way that businesses were affected were complex and they seemed to affect a lot of different types of businesses. For example, a food manufacturer lost a bunch of livestock and [was] also not able to operate because the sewage and other utilities being offline, so they were out of business for essentially one full week.

Sablik: The surveys cover businesses across the entire Fifth District. Were businesses outside the storm's path also affected?

Kosakow: If you think about how interconnected our region is, businesses all over our region were affected by this. Over one quarter of responding businesses outside of FEMA designated areas reported some impact to their business. For example, a home builder in northern Virginia had to delay work because utility companies were sent to areas that were affected in western South Carolina and North Carolina.

Several contacts reported they expect fewer sales since their clients needed to focus on rebuilding. A coffee roaster that sells throughout the entire Southeast had a number of customers just shut down for a couple weeks. Their supply chains were disrupted and they weren't actually able to send their product to customers in the region, therefore lowering revenue and also demand for the product. A Richmond-based furniture store who sources furniture from western Carolina were not able to get any product.

Sablik: A lot of the economic data and headline figures that the Fed uses often lag conditions on the ground, which makes things like the surveys and outreach to business contacts an important source of timely information for the Richmond Fed.

Bethany, what are you learning from your business contacts about their recovery from Hurricane Helene?

Greene: The journey to recovery is ongoing. Small businesses, in particular, are vulnerable to natural disasters because their access to credit can be more limited. This is something to pay attention to since there's a high concentration of small businesses in these affected areas.

After a storm, something these businesses have to navigate is accessing outside resources for disaster relief. We've heard about how the community has mobilized efforts to offer financial assistance as well as recovery resources and technical assistance to businesses applying for disaster loans. We're also hearing that there may be some level of loan fatigue — businesses who took out COVID-era recovery loans may currently be hesitant to take on additional debt.

Sablik: Digging into that a little bit more, what industries seem to be recovering quickly and which are maybe facing more challenges?

Greene: A lot of businesses have returned to normal operations pretty quickly, but the timelines for recovery depend heavily on location. Something that was clear about the storm is that severe damage was localized to very specific geographies.

Industries that rely on tourist foot traffic are facing a lot of challenges right now. The Buncombe County Tourism Development Authority is reporting a $584 million loss in revenues for tourism-related businesses, which is a 70 percent decline in fourth quarter spending. So, even as these businesses are fully operational, their recovery will depend on visitors coming back to the region.

Sablik: Jason, what did you learn from the surveys about business recovery?

Kosakow: We asked businesses how long they expect until they're back to full operations. Among businesses that were affected, nearly all of them reported to either being fully operational or expect to be fully operational within one to three months. That does not mean that businesses are back to 100 percent. That just means businesses are able to be open and be serving their customers.

Realistically, what businesses need to become fully operational is the re-establishment of infrastructure. If water lines go out and sewage goes out, you can't operate your business. That was the most cited thing that businesses need to become fully operational. Also [they want] employees to return. You can think about some of the devastation to communities in western Carolina, right? If employees can't physically be there, oftentimes they're not actually able to operate.

Businesses are really good at adapting to tough conditions. We just came out of the COVID pandemic and businesses were able to adjust as needed through that. An example of this is a company that manufactures dental products allowed a competitor to use their office space after their office flooded and over 50 employees were displaced. I also heard from hotels [about] how people are living there for weeks until they could find other shelter.

The resiliency of businesses in our district is pretty amazing. One anecdote that stuck out to me was a theme park in western North Carolina that had to completely shut down operations for the month of October. This is usually their busiest time of the year and it took a really big hit to the revenues. So, for the entire month of October, they're cleaning up debris. They're getting rides operable. They're fixing equipment. Their petting zoo needed to be maintained and the animals looked at, and you can think about everything that else that goes into operating a theme park. It took a lot of work and they're able to get back into operations now.

Sablik: Do we have any information on the infrastructure recovery such as, as you mentioned, the rebuilding of roads or homes damaged by the storm?

Greene: Repairs to roads damaged by the storm are ongoing. One of the major infrastructure recovery projects is the rebuilding of I-40, which is an interstate running east-west through North Carolina. The storm completely washed out a portion of the interstate at the North Carolina and Tennessee border. Right now, there's no official date set for reopening. It is considered a long-term closure.

Something we will have to continue to follow is the rebuilding of residential areas. The lack of flood insurance in the area will likely mean a long-term loss of housing stock and some amount of displacement from the region. Clearly, many people left the region during the immediate aftermath of the storm — for example, office workers who needed internet service to keep working. Also, road and bridge repair delays for more remote regions could accelerate the displacement of households from these areas.

Sablik: We've been talking about the economic effects of Hurricane Helene. But, of course, the storm also caused tremendous loss of life and property in these communities, and that's something we want to be mindful of.

Greene: Yeah, I got mostly positive responses to us reaching out. Someone actually mentioned that they're happy that we thought of them.

I think it's also about our approach. It's like, "We know that you all are busy. We know that you all are going through a hard time. We would love to hear from you." I think that concern, I think they do appreciate that.

The Charlotte team really had to think about the sensitivity piece. Our approach was we're definitely not going to reach out to our contacts immediately after this happened, definitely give our contacts a couple of weeks before we ask about how they're doing, how their business is doing.

Sablik: Bethany and Jason, thanks so much for joining me today to share this update.