Monday, February 06, 2012

What Is the Texas Drought Telling Us?

So the other day I guessed that the cost of the Texas drought was ~ $5 billion for 2011 (though I didn't add up the cost of the fires.) And I wondered if droughts might be the most expensive natural disasters in the disaster spectrum. But John Fleck has been wondering about the opposite -- whether even this drought is a relative blip in the larger forces the buffet an economy.

He presents this graph of the Texas coincidence economic index. It's a combination of four different metrics:
  1. nonfarm payroll employment
  2. average hours worked in manufacturing
  3. the unemployment rate
  4. wage and salary disbursements deflated by the consumer price index (U.S. city average)
Texas state coincident economic indexand finds that Texas looks pretty good by this measure.

You can't even see the effects of the drought there -- though the fact that it excludes nonfarm payrolls might matter a little. The Texas GDP is $1.207 T (2010), and $5 B (if that's accurate) would be 0.4% -- a setback to an economy, but certainly not a shock.

After noting that only about a thousand people in Texas are currently needing water to be trucked in, and only about 10,000 have less then a 180-day supply, John concludes:
For people like me who spend our time running around with our hair on fire trying to warn the public of America’s looming water shortages, Texas seems to me like an incredibly important case study about what happens when shortage finally arrives. So what’s it telling us?

1 comment:

Steve Bloom said...

Gosh, journalists practicing D-K, albeit phrased as a question. Whoda thunk it. Of course I have no better ideas as to the answer, but in the comments at JF's I raise several points that on the face of it would seem to confound a simple correlation.