Palisades, Eaton fires could cost local economy up to $9 billion, new report says

LOS ANGELES - The January wildfires in Los Angeles County could cost the local economy as much as $9 billion over the next five years, according to a new study released this week.

The analysis, released by the nonprofit Los Angeles Economic Development Corporation, took a deep dive into the devastation left behind by the blazes, most notably the Palisades and Eaton Fires, and how much they will cost the community in the coming years. 

The Palisades and Eaton Fires

The backstory:

More than a dozen wildfires broke out in Southern California in January, the most devastating being the Palisades Fire in the Pacific Palisades and Malibu areas and the Eaton Fire in the Pasadena and Altadena areas.

Combined, the fires burned more than 40,000 acres, destroyed and damaged nearly as many structures, and killed at least 27 people. Many estimates predict the fires will be some of the costliest natural disasters in United States history. One estimate from AccuWeather estimated the fires would cost more than $250 billion.

The costs of repairing the destroyed communities will be enormous on their own, but other costs like disruptions to local businesses will have continual impacts for years as the area recovers. 

In their study released on Thursday, the Institute for Applied Economics looked at how severely the area will be impacted, based off of how quickly the region builds back.

Damage from the fires

By the numbers:

The most immediate cost is the damage from the fire. The IAE estimates that property damage in the Eaton and Palisades fire zones alone is between $28 billion and $54 billion.

But with thousands of businesses gone in the fire, the costs will continue to go up the longer the recovery takes and the longer those businesses remain closed. 

The cost of recovery

The hit to the economy all hinges on how fast the recovery is. In their analysis, the IAE looked at three different scenarios, at different recovery speeds, and calculated how big that economic hit would be from the years 2025 to 2029.

All told, LA County economy could lose as much as $4.6 billion in the fastest scenario, to $8.9 billion in the worst-case scenario, according to the analysis. 

They also predict a major loss in jobs — up to nearly 50,000 job-years, or the equivalent of 50,000 working full-time for a year — and tax revenue. In the slowest recovery scenario, the group estimates federal, state and local governments could miss out on as much as $1.41 billion over five years.

Dig deeper:

With shuttered businesses affecting supply chains throughout Southern California, the study estimates those costs would balloon to between $5 billion and $9.7 billion.

While the damage most directly affects the Palisades and Eaton fire burn areas, the group says it's concerned about other indirect effects that could cause damage to the regional economy as a whole. Specifically, the authors are worried about burned-out residents moving away, about a potential drop in tourism, and a potential price increase on construction supplies.

Recovery timeline

Big picture view:

The study estimates that it could take between four and 10 years for the region to fully recover. 

Earlier this week, Los Angeles Mayor Karen Bass reported that the first step of cleanup in the Palisades Fire area was completed "months ahead of expectations," and the EPA says the Eaton Fire zone has also completed this first step. 

It remains to be seen whether recovery will continue at a similar rate.