Texas has thus far endured a heat wave of historic proportions in the summer of 2023. The higher-than-normal temperatures have created health issues for many residents and impacted quality of life for millions of people. Not surprisingly, the effects do not stop there.
As with any extreme weather event, excessive heat affects the economy in dynamic and complex ways. Substantial losses occur as a result of lower agricultural yields and an overall decline in productivity across multiple industries. Even morbidity and mortality increase. These losses are partially offset by gains in other sectors, such as increases in utility consumption.
In order to provide a perspective on the economic impact of this summer’s heat wave as well as the potential consequences of a long-term trend toward hotter summers, our firm started with detailed baseline forecasts from our US Multi-Regional Econometric Model (which I developed over 40 years ago and have consistently updated, refined, and otherwise lived with since that time). We then merged in an extensive analysis of economic responses to temperature changes over several decades in all 50 states. This process allowed for detailed assessments over several hundred industries. Enough of that!
