California drought cost is 2.7 billion in 2015

USA Today looks at the socio-economic implications of the drought.

The drought in California will cost the state’s economy $2.7 billion this year and nearly 21,000 jobs as the four-year drought continues in the nation’s most populous state, according to a new study from the University of California-Davis.

The biggest hit comes in agriculture, which will lose $1.84 billion this year, the study said. The rest comes from ripple effects across the state’s economy. Almost half of the job losses — 10,000 — are in seasonal agriculture jobs. In addition, the drought will force 542,000 acres to lie fallow, nearly all in the Central Valley.

This year’s economic loss is greater than last year’s $2.2 billion cost, according to the study released late Tuesday.

Despite the drought, the state’s agricultural economy remains strong, mainly because of California’s huge, but shrinking, reserves of groundwater. Those reserves offset the shortage of surface water in the state’s reservoirs, the study said.

“We’re getting by remarkably well this year — much better than many had predicted — but it’s not a free lunch,” said lead author Richard Howitt, a UC-Davis professor emeritus of agricultural and resource economics.

“If a drought of this intensity persists beyond 2015, California’s agricultural production and employment will continue to erode,” said study co-author Josué Medellín-Azuara, a water economist with the UC-Davis Center for Watershed Sciences.

While a large amount, $2.7 billion is still a small fraction of the state’s total agriculture economy. California farmers and ranchers currently earn more than $46 billion annually in gross revenues, a small fraction of California’s $1.9 trillion-a-year economy, according to UC-Davis.

This year’s economic loss from the drought is similar to the estimate from global reinsurance firm Aon Benfield, which was not involved in the UC-Davis study. “This remains in line with our current expectations,” Aon Benfield meteorologist Steven Bowen said.

“While there has been slightly more rainfall for the state in the last several weeks, it has been merely a drop in the bucket for what California needs to truly pull itself out of this drought abyss,” Bowen added. “There remains lots of uncertainty as to how 2016 will play out, but El Niño should provide some much welcome relief in parts of the West,” he said.

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