The winter storm currently forecast to hit the Northeast states later Monday could dump up to a foot and a half of snow accompanied by gusting winds that could bring down power lines. Schools and businesses could be forced to close and travel is certain to be a mess.
Damage from the winter storm is most likely to come from lost productivity: businesses not only lose sales, but employees lose wages because they can’t get to work. Some of that loss is offset by people who earn more plowing out from under the snow and working to restore lost electrical power. In general, a weekend storm is less costly in productivity losses than a weekday storm.
According to the Insurance Information Institute (III), winter storm damage and cold waves cost U.S. residents $1.7 billion in 2016. In the decade between 2006 and 2016, losses totaled $29 billion from winter weather, less than half the losses from wildfires/heatwaves/drought and less than 20% the $180 billion losses from severe thunderstorms (including tornadoes).
Severe winter weather was also responsible for 813 deaths in the 10-year period, second only to the 1,646 deaths caused by severe thunderstorms, according to the III.
Total damage from severe winter storms in 2015 in several central, eastern, and northeastern states caused a total of $3 billion in damages of which $1 billion occurred in Massachusetts alone according to the U.S. National Oceanic and Atmospheric Administration (NOAA).
In 2016, NOAA reported no severe winter weather events along the corridor threatened by this current big storm. However, the NOAA report noted that the average cost of damage from a winter storm is $3 billion. The cost includes losses from business interruptions, but not lost wages.
What are the chances that damage totals will reach $3 billion this time? The National Weather Service is warning of 6 to 12 inches of snow in New York City with high winds. Boston and New York are both under a blizzard watch and will likely be upgraded to a blizzard warning later Monday or early Tuesday. Boston should look for at least a foot of new snow. Washington, D.C. and Philadelphia may miss the blizzard conditions but can expect 4 to 8 inches of snow.
The storm is clearly a big one and could affect some $6 billion of the total U.S. average daily GDP in just New York, Boston, and Philadelphia. Unless the storm lasts longer than expected, the odds are against the storm costing $3 billion in economic losses. But losses could easily top $1 billion, especially if lost wages are included.