Goldman Sachs on California Wildfires

Overview

Goldman Sachs analysts have stated that the recent wildfires in Los Angeles County, California, may be the most expensive wildfire event in the state’s history, potentially affecting upcoming U.S. economic data.

Economic Impact

Comparing these wildfires to other disasters like hurricanes and earthquakes, the analysts project a reduction of approximately 0.2 percentage points in first-quarter GDP growth. This estimation does not account for any rebound from rebuilding efforts.

Labor Market Effects

In terms of employment, Goldman Sachs predicts a decline of about 15,000 to 25,000 in nonfarm payroll growth for January due to the wildfires, although only about 0.5% of California’s population is currently under evacuation orders. The bank does not anticipate a significant increase in jobless claims as a result of the fires, with initial claims expected to remain low.

Inflation and Insurance Costs

The analysts believe that insurance costs will not significantly influence inflation, as homeowners’ insurance comprises a minimal portion of the personal consumption expenditures price index.

Damage Estimates

The LA County has faced a series of severe wildfires over the past week, with initial damage estimates around $30 billion. This could position these wildfires as the costliest in U.S. history.

Authorities are working urgently to control the fires ahead of predicted high winds that could worsen the situation.