February 3, 2016
Last week’s record breaking snowfall had an enormous impact on our
economy.
Aside from the accelerated demand for milk and bread (which I am not
sure I really understand; how about some fruit or dessert?), a significant snowfall like the one we had impacts
virtually the entire economy.
For grocery stores, there are certainly accelerated purchases of certain
items. While we could maintain that these purchases would have been made at
some point and the prospect of significant snow simply accelerated those
purchases, the punctuated demand certainly led to shortages.
As the snow began to fall, I made one last trip to the store, and
shelves that normally are full were pretty much empty. The same was true at
Home Depot: Snow blowers, snow shovels and ice salt had all been purchased. There was very little left, and what was left was not suitable for the 30 inches of snow in the forecast.
While demand for certain items certainly spiked, it was also the case
that the snow had an inverse impact on other businesses.
While everyone was home drinking their milk and eating their bread,
they were NOT out golfing, shopping for clothes (unless it was for a new winter
coat) or eating at Chili’s. So, while demand for some items shifted
dramatically, demand for other items fell just as dramatically. Not only that,
for some on tight budgets, the purchase of a snow blower might delay the
purchase of some other item.
The snow also impacted supply. Of the four gas stations in my community
that I frequent, two ran out of gas due to the fact that their company could
not get trucks to our community to re-supply the stations. Because of this,
customers were driven elsewhere to make their purchases.
Those of us who have jobs were also impacted. While I worked from home,
it was certainly the case that I was not as effective or productive. In fact, I
was supposed to have flown out of town on business, but my flight was
cancelled. Many schools were cancelled
for the week, this certainly altered the plans of some parents who needed to
work, but also had to make arrangements for their children. Forget the increased travel time, many of us lost wages due to the fact that we were shoveling out our cars instead of working and not getting paid to do so.
For municipalities, storms like this can entirely change their budget. Money
that could have been spent on text books, teacher and police salaries or a new library were
used to plow streets. Some of those streets may have been damaged in the clearing process and now require
repairs. While most cities have money in their budgets to cover a certain
amount of snow, due to the amount of snow in this single storm and the amount
of time it took to remove it, budgets may be strained. This will be
particularly true if there is another storm in the next few weeks.
Post snowfall, there are certain business segments that probably
benefit: the automobile repair shop may see increased activity due to accidents
that occurred on the slippery roads; heating (HVAC) companies may receive calls
to service a home because the climate systems were not working properly; I
broke a snow shovel – and must replace it. So, the snow storm may have a slight
residual impact on our economy impacting demand for certain goods and services.
In all of the above, I would ask you to reflect on the simplest
definition of Economics: “Economics is the Study of Choice.” Storms like the
blizzard we just experienced can force us to make certain choices or accelerate
them. That day off that we were saving
so that we could go fishing, to the doctor's office or shopping, it was used because we needed to stay
home with our children who did not have school. That snow blower that we were
thinking about purchasing NEXT year… well, we made it in 2016, and are probably
glad we did. Had the snow not come, the city in which we live was going to put
a new roof on the courthouse and a new playground at the park. Now, those
projects may get postponed.
Yes, we are economic beings. We are often rationale in our actions.
Sometimes, however, we must make choices due to unexpected events.
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