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The Verdict is in on How Much Texas’ Heat Wave Clobbered Its Economy This Summer

In the summer of 2023, Texas witnessed a scorching reality that left indelible marks on the health of its people and economy.

It was so bad that Austin Mayor Kirk Watson warned people to stay inside.

“People sometimes think, ‘Well, I can beat the heat,'” Watson said during a news conference in June. “But with this heat, in this humidity, it’s dangerous, and we need to pay attention to that.”

It seems people across the state did stay home, and tourists stayed away as well, per recent research from the Dallas Federal Reserve that found heat melted away $24 billion from Texas’ economy.

The Lone Star State’s punishing and record-breaking heat wave, coupled with an unyielding drought, significantly affected local businesses and, by extension, the state’s economy. The ripple effects of the climate crisis were felt far and wide, echoing the urgent need for adaptive measures to mitigate future repercussions.

Texas was hit harder than other states

Analyses used 20 years of data to demonstrate Texas’ vulnerability to rising temperatures. For every 1-degree increase in average summer temperature, Texas sees a 0.4% slowdown in its annual nominal GDP growth.

That is about twice as much as other states.

A study from the Journal of Money, Credit and Banking showed a dip of 0.15% to 0.25% for the average state, with southern states impacted more.

A garden center sign in Texas
A garden center sign in Texas. 

While rising temperatures have impacted much of the country, Texas’ already hot baseline summers are the reason for the difference, according to the Dallas Fed.

“The impact of an increase in summer temperatures on Texas GDP growth is twice as pronounced as the change in the rest of the US because summers are generally hotter relative to the rest of the country,” the analysts wrote.

In other words, an increase from 90 to 91 degrees is more costly than an increase from 70 to 71.

The summer of 2023 was particularly harsh in Texas, with temperatures soaring 2.5 degrees above the state’s post-2000 average. This anomaly, as the estimates suggest, may have cut annual nominal GDP growth by 1% for 2023, translating to a $24 billion loss.

Local businesses suffered, and many were forced to close

The Dallas Fed’s Texas Business Outlook Surveys in August found that 24% of 352 Texas businesses reported lower revenue or lower production due to the heat.

Some industries were hit harder than others, notably leisure and hospitality. Notable establishments like SchlitterbahnSeaWorld, and Six Flags blamed their dips in summer visitors on the heat wave.

“The extreme heat definitely kept people home,” one respondent to the survey wrote. “That, coupled with the economy and people leaving Texas to go on vacation in cooler climates like Colorado and Utah, also provides a decrease in revenue.”

schlitterbahn texas

Austin, known for its vibrant social scene, witnessed an uncharacteristic lull this summer.

One brewery owner in Austin told My San Antonio that the summer heat “crushed” the city as several local breweries were forced to close their doors.

To be sure, other factors may have had some of the breweries struggling already, including a boom in the local industry creating more competition. And small businesses across industries may have been feeling the end of pandemic-era assistance programs like the Payroll Protection Program loans and Employee Retention Credits.

A near-empty outdoor seating area at a brewery in Houston.
A near-empty outdoor seating area at a brewery in Houston. 

A call for Texas to adapt

Many cities in Texas experienced record-high temperatures this year, with some breaking decades-old records multiple times.

The Dallas Fed did note that if the rise in temperatures is consistent year-round, some of the summer losses could be offset by a boost to the economy in the spring and fall. However, it would likely not compensate for the loss of out-of-state visitors more likely to travel during the summer months.

Unfortunately for the tourism industry and places like breweries that often depend on outside seating for customers, there is no relief in sight.

Projections by Texas A&M University’s Office of the Texas State Climatologist paint a grim future, with 100-degree days expected to nearly double by 2036, especially in urban areas.

To put that in perspective, Austin averaged 73 100-degree days in the last two years.

The Dallas Fed concluded that the escalating frequency and severity of heat waves necessitate adaption.

“The economy can adapt,” the analysts wrote. “Theme parks such as Six Flags in Arlington are implementing new ways to protect customers from the heat by adding cabanas to provide additional shade.

“Communities may also adopt new technology to become more sustainable, create walkable neighborhoods or retrofit existing buildings to improve energy efficiency and seasonal ease of movement.”