With the arrival of spring Thursday, the snow left behind by a succession of brutal storms will soon begin melting. But the bills for added costs of one of the worst U.S. winters in decades are still piling up.
From epic pothole repair bills to lost productivity from grounded flights, this has been one of the coldest—and costliest—winters in memory.
This winter’s awful weather is already showing up in economic data. Federal Reserve Chair Janet Yellen last week told a Senate panel that the harsh winter has had a chilling effect on consumer spending, which makes up about 70 percent of economic activity.
“A number of data releases have pointed to softer spending, and part of that softness may reflect adverse weather conditions,” she said. “It’s difficult to discern how much.”
The overall impact on the U.S. economy is hard to peg with any accuracy; measuring the growth of a $16 trillion economy is at best a guess under ideal circumstances. But just a one-tenth of a percent drag from missed work, canceled flights or lost retail sales amounts to $4 billion for the three-month winter season.
Still, the chilling effect on the economy has been widely felt. Home sales were hammered—falling to a 19-month low in February—as many would-be buyers stayed put. In turn, car dealers saw foot traffic dry up once the snow started falling.
Bad weather has affected factories, too, according to recent surveys by the Federal Reserve banks in Dallas; Richmond, Va.; and Kansas City, Mo. Nationwide, durable goods orders dropped 1.0 percent in January and were revised lower for December.
Economists note that much of that lost business will likely be made up once the snow melts and better weather arrives, as homebuyers resume their house hunts, and car buyers follow through and replace their aging clunkers.
Snarled roadways and snowed-in airports accounted for much of the slowdown as those transportation bottlenecks kept workers and consumers from getting where they wanted or needed to be. Each major storm inflicts losses of as much as $300 million-$700 million in lost wages, taxes and retail sales for just a one-day shutdown, according to a study by IHS Global Insight.
Hourly wage earners who can’t make it to work are among those hit hardest, accounting for almost two-thirds of direct economic losses, the researchers found. Lost retail sales and income and sales tax revenues roughly double the initial economic impact, they said.
This has been an especially expensive winter for highway departments charged with clearing and maintaining roadways. In some hard-pressed sections of the country, prices for road salt doubled or tripled. Already-stretched state and local budgets were further strained by higher-than-expected overtime for snowplow drivers.
“This is a very unique winter, even talking with some of the old-timers who have been here longer than I have,” Houghton County, Mich., highway engineer Kevin Harju, told the Associated Press. “You can get a lot of snow or you can get extremely low temperatures, but not both—except this year.”
State and local governments from the Great Plains to the Upper Midwest, from the Deep South to New England, are now scrambling to fill holes blasted in their budgets by one of the fiercest winters in memory. Many spent two or three times as much as they budgeted. Virginia, for example, budgeted $157 million for snow removal; the final bill may be nearly double that amount.
Consumers are taking a hit from a pothole epidemic that is costing drivers an estimated $80 billion in repair costs to fix busted axles and blown tires, according to TRIP, a transportation research and lobbying group.
The road ahead looks even bumpier. The spring thaw is already producing a widening hole in repair budgets—just as federal funding for road repair is drying up.
“It’s not an option to not remove the snow, but that’s money that comes out of their repair budgets,” said Frank Moretti, a TRIP spokesman. “So there’s less money to address what is going to be a worse-than-normal spring in terms of road damage and potholes.”
Highway departments, already starved for cash, are facing a new funding drought as the federal highway trust fund that states rely on to fix crumbling highways is about to go broke. With repair and constructions costs rising, and the federal gasoline tax of 18.3 cents a gallon (24.4 cents for diesel) frozen for nearly two decades, the trust fund balance is expected to fall to zero by this summer.
Air travel also has been problematic and costly for millions of stranded travelers grounded by a succession of flight cancellations and delays. With airlines running at near capacity in the best weather, the backups caused by snowstorms have taken longer to clear.
New regulations governing pilot schedules and tarmac delays are also complicating the usual snafus brought by bad weather.
The total toll this winter—on passengers, airlines and airports—topped $6 billion to, according to masFlight, a software company specializing in airline operations.
(Read more: Air travel’s $6 billion winter of discontent)
More than a million flights in and out of U.S. airports were canceled or delayed since December, snarling travel for more than 90 million passengers. The lost productivity and out-of-pocket costs total about $5.3 billion, compared with a typical winter average of about $2.9 billion, according to masFlight estimates.
Airline earnings also took a hit, with as much as $500 million in added operating costs and lost revenue, according to masFlight estimates.
“This cumulative effect of the weather will have a big effect on profitability in the first quarter,” Gordon Bethune, former CEO of Continental Airlines, told CNBC.
Airports also felt the economic pain, on both sides of the ledger. While they’re footing a bigger bill for snow removal and other operating costs, revenues have fallen because of reduced fees from parking lots and slower concession sales as well as other lost income. The total impact comes to about $4.5 million, masFlight figures.
A full accounting also has to include losses from damage caused by roof collapses, downed tree limbs and power lines, frozen pipes or car accidents.
This winter is on track to be the fifth costliest since 1980 in terms of insured losses, according to the Insurance Information Institute. So far, an estimated $1.5 billion in damages has been paid out on more than 175,000 claims by policyholders. That figure covers only two of the four major winter storms to date. The costliest on record for damages was the Blizzard of 1993, which produced $5 billion in overall losses.
But those numbers represent just the cost side of the ledger. For every auto claim paid out, a repair shop enjoys a pickup in business—money that goes right back into the economy to boost growth. Even if some money is lost in that equation, much of it will likely be made up next year with higher insurance premiums.
Still, some business swallowed by storms will be lost for good. “You don’t go out and buy three dinners the next time you go out to a restaurant,” according to Evan Gold, who tracks the weather’s economic impact for Planalytics, a business weather intelligence firm.
Gold figures about $15 billion worth of weather-related business losses will never be made up. His back of the envelope estimate assumes this winter’s storms have affected about 100 million people and that roughly 10 percent of lost business is gone for good.
Even though winter is over, a reliable estimate of the hit to the economy will take many more months.
“No one can jump to any solid conclusion until we shovel out of the snow,” said the National Retail Federation’s chief economist, Jack Kleinhenz.