The wildfires tearing through Los Angeles are also a financial hurricane that will leave scars on the U.S. economy for decades. Over 38,000 acres—an area 2.5 times the size of Manhattan—have already been scorched, and the destruction keeps growing.

The numbers are mind-bending. Estimated damages have climbed to $150 billion, the highest ever recorded for a wildfire in America.

Just 24 hours ago, experts put the damage at $50 billion. Now, AccuWeather’s new estimate triples that figure. Over 10,000 structures have been destroyed, and rebuilding those homes and businesses is expected to take more than a decade.

This makes the 2018 Camp Fire, which caused $12.5 billion in damages (adjusted for today’s dollars), look like child’s play. The LA wildfires are twelve times more expensive, and the total cost is still climbing.

If the fires rage on, the final figure could push past Hurricane Katrina’s $200 billion bill, making this the most expensive disaster in U.S. history. Not a great record to break, we’d wager.

A financial punch that stings worldwide

Let’s put this $150 billion into perspective. It’s more than the GDP of 58 countries. That’s right—this wildfire has done more economic damage than most economies produce in an entire year. To get even more specific, the $150 billion is more than half the GDP of Finland and a third of Singapore’s GDP.

Insurance companies saw some of this coming, and a lot of homeowners are paying the price for it—literally. In the Pacific Palisades, 69% of homeowners lost their insurance policies before the fires even started.

Back in July, State Farm canceled 1,600 policies in the area. Other insurers also bailed, leaving thousands with no choice but to rely on California’s FAIR Plan, the high-risk insurance safety net. Now, losses to the FAIR Plan are expected to hit $24 billion.

JPMorgan estimates that insured damages will total $20 billion. But while some insurers backed out early, others stayed in and underestimated the risk. This is shaping up to be the biggest test the insurance market has ever faced.

Reliance on the FAIR Plan skyrocketed last year. The Pacific Palisades saw an 85% jump in FAIR Plan usage compared to 2023, far above the 40% average increase in California ZIP codes. This reliance is stretching California’s finances thin. The state is facing a massive, years-long burden, as fires continue to rip through some of its most valuable real estate.

The Palisades fire burned through a ZIP code where the average home costs over $3 million. The Eaton fire, raging east of Los Angeles, also tore through high-value neighborhoods.

Lives lost in the chaos

The human toll is equally grim. So far, 16 deaths have been confirmed, but the final count won’t be clear until investigators can access neighborhoods still plagued by downed power lines and gas leaks. Among the dead are an amputee and his son with cerebral palsy, who were found together in their home.

Another victim stayed behind to fight the fire engulfing the house he had lived in for over 50 years. An 85-year-old woman refused to leave her pets behind as the Palisades fire closed in. She didn’t survive.

A former Australian child star and a Malibu surfer described as a “magnet for people” also lost their lives. Of the confirmed deaths, five are tied to the Palisades fire near the coast, and six to the Eaton fire. Officials warn that the numbers could rise significantly.

Economic ripple effects

Estimated damages now account for about 0.55% of the entire U.S. GDP. This disaster is also exposing gaps in U.S. disaster response policies, as billions of dollars in federal aid will likely be needed to support recovery efforts.

The International Monetary Fund (IMF) has flagged climate change as a growing risk to financial stability. For the U.S., the fires come at a time when the economy is already dealing with high interest rates and lingering inflation. In 2025, GDP growth is forecasted at 2%, a slight downgrade from 2.7% in 2024.

The Consumer Price Index (CPI) inflation rate has dropped to 2.7% from its peak of 9% in 2022, but any more economic shocks will derail progress. The Federal Reserve has tried to stabilize the economy, but the cost of disasters like these could force policymakers to rethink their strategies.

Rebuilding efforts will likely require massive government spending, adding pressure to the national debt and President Donald Trump. Poor guy had dreams of cutting down spending.

The labor market, while stable with a 4.2% unemployment rate, could face challenges as thousands of Californians lose jobs due to the fires. Rebuilding will create opportunities, but they won’t come fast enough for those already struggling.

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Source: https://www.cryptopolitan.com/la-wildfires-will-affect-us-economy-for-decades/