The devastating wildfires sweeping through Los Angeles have captured national attention, sparking concerns about their broader economic implications. However, leading economists project that the fires, despite their catastrophic toll on property and communities, will have a modest impact on the U.S. economy as a whole.
J.P. Morgan economist Abiel Reinhart described the L.A. wildfires as “the costliest climate disaster in U.S. history,” with property damage estimated in the quarter-trillion-dollar range, surpassing even Hurricane Katrina. Despite the staggering losses, Reinhart emphasized that the short-term effects on GDP, employment, and inflation are expected to remain limited. For context, the total U.S. domestic product reached nearly $30 trillion in 2023.
Goldman Sachs economists echoed this outlook, forecasting a minor 0.2 percentage point drag on first-quarter GDP growth. While job growth may see a temporary reduction of 15,000 to 25,000 positions in January, the broader labor market—which added 256,000 jobs in December—is poised to absorb the shock. Notably, less than 0.5% of California’s population was under evacuation orders at the height of the fires.
Past natural disasters suggest that rebuilding efforts could counteract initial economic losses, providing a pathway to recovery in the affected regions. While the fires’ toll on local communities is undeniably severe, the resilience of the national economy remains intact.