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Speaker 2: Cape Elizabeth is a beach town near Portland, Maine. It
Speaker 2: has what you'd expect from a New England summer destination,
Speaker 2: a lighthouse, a fruit farm, and a watering hole near
Speaker 2: the beach, kettle cove, ice cream and shack.
Speaker 3: We may come made ice cream and on the other
Speaker 3: half of our building we do like lobster rolls fry clans,
Speaker 3: so we cater to the tourists in the locals for
Speaker 3: the summer.
Speaker 2: That's Michael Concannon. He owns that spot, which locals call
Speaker 2: the Shack. In a typical year, business is good for
Speaker 2: an ice cream and lobster roll shop in Maine, where
Speaker 2: summer temperatures average around seventy degrees. But this summer, Cape
Speaker 2: Elizabeth is one of the many places that the National
Speaker 2: Weather Service is predicting to exceed normal temperatures. Michael says
Speaker 2: he's trying to get ahead of it by installing heat
Speaker 2: pumps to pull cooler air into the one hundred year
Speaker 2: old building where the shock is located.
Speaker 3: But they are expensive, so you know, for us to
Speaker 3: do it, we'll need three basically keep pump heads for
Speaker 3: my building and that will add twenty five thousand dollars
Speaker 3: that I was hoping not to spend this summer, but
Speaker 3: I am going to.
Speaker 2: That's not to mention skyrocketing electric bills. He says his
Speaker 2: costs can go from twelve hundred dollars in a typical
Speaker 2: summer month to as high as two thousand dollars when
Speaker 2: it's especially hot and all that warming it's hitting his
Speaker 2: supply too. Temperatures in the Gulf of Maine just keep climbing.
Speaker 2: That means there's fewer lobsters available, pushing prices up.
Speaker 3: Lobsterols are really expensive anyways, but you know, say in
Speaker 3: the summer, they're being twenty three twenty four dollars a
Speaker 3: lobster roll, and then all of a sudden it shoos
Speaker 3: up to forty. Most people skip the lobsterl cape.
Speaker 2: Elizabeth's small business owners aren't alone in navigating the financial
Speaker 2: impact of a warmer planet. More than half the US
Speaker 2: is predicted to see above average temperatures this summer, and
Speaker 2: Bloomberg reporter Katerina Sireva says that the heat could take
Speaker 2: a serious toll on many small businesses, which already operate
Speaker 2: on thin margins. Small businesses we know employee about fifty
Speaker 2: percent of the US workforce. They're a huge part of
Speaker 2: the economy, right, so anything that impacts them adversely like
Speaker 2: these weather conditions is a problem and a big problem
Speaker 2: for our wider economy. For meteorologists, summer starts June first,
Speaker 2: and a government report is predicting extreme heat and places
Speaker 2: that aren't used to it, like Portland, Maine, and Spokane, Washington,
Speaker 2: and in places that can't afford to get any hotter,
Speaker 2: like Houston, Texas. Today on the show, we talk with
Speaker 2: economic analysts crunching the numbers and small business owners across
Speaker 2: the country who are feeling the squeeze of hotter, and
Speaker 2: we examine what solutions, if any, the government might be
Speaker 2: able to offer. From Bloomberg's Washington bureau, this is a
Speaker 2: Big Take DC podcast. I'm your host, Sleia Mosen. Katerina
Speaker 2: Sarareeva is a Bloomberg Economics reporter based in Houston. Summers
Speaker 2: there are always hot, still, last year was different.
Speaker 4: We're used to temperatures in the nineties and high humidity here, right,
Speaker 4: that's normal, But when you just have days on end
Speaker 4: where it's one hundred and ten degrees, it's really tough.
Speaker 4: Because I mean, what do you do? You can't really
Speaker 4: go outside.
Speaker 2: Last June, a high pressure system known as a heat
Speaker 2: dome trapped warm air over the city and kept temperatures high.
Speaker 2: Texas is power grid buckled under a record demand for electricity.
Speaker 2: State and local governments placed millions of people under extreme
Speaker 2: heat advisories. It was life threatening weather and.
Speaker 4: That just continued into July and August. It's just miserable.
Speaker 4: No one enjoys it.
Speaker 2: So how did you cope with it?
Speaker 4: So we stayed inside a lot. When I walked by
Speaker 4: restaurants or stores, I mean, you just didn't see people
Speaker 4: inside because I think people weren't doing that. They weren't
Speaker 4: walking to these local small businesses.
Speaker 5: Nobody was looking for a reason to be outside during
Speaker 5: this time period.
Speaker 2: That's Ray Perryman. He runs an economic research firm out
Speaker 2: of Waco, Texas. Last year, his firm tried to put
Speaker 2: numbers to just how bad these small businesses across Texas
Speaker 2: were hurt by the heat.
Speaker 5: One thing that struck me on that one was the
Speaker 5: sheer magnitude of it. Because the thing we found with
Speaker 5: regard to the major heat wave that occurred in twenty
Speaker 5: twenty three was that on the whole, there were net
Speaker 5: losses to the stead economy of about nine point five
Speaker 5: billion dollars as a results of this.
Speaker 2: That's not easy to recover from. On a local level,
Speaker 2: Katarina's already seen some businesses closing their doors.
Speaker 4: There were this below restaurant and my neighborhood that closed
Speaker 4: after many years in operation.
Speaker 2: You know, the owner talked about it just being.
Speaker 4: More difficult to operate right now, the cost of food
Speaker 4: and labor rising, but then also hot temperatures putting a
Speaker 4: dent in your revenue.
Speaker 2: But the impact is not just local, Katerina told me,
Speaker 2: a hit to the Texas economy is a hit for
Speaker 2: the rest of the country too.
Speaker 4: Texas is obviously a huge state. It accounts for ten
Speaker 4: percent of the national GDP, We account for twenty two
Speaker 4: percent of all US exports, so anything that's going on
Speaker 4: here obviously impacts the country more broadly as well.
Speaker 2: There are three point two million small businesses in Texas.
Speaker 2: Emily Kerr, an economist at the Federal Reserve Bank of Dallas,
Speaker 2: dug into how last summer's extreme heat impacted businesses across
Speaker 2: the state.
Speaker 1: When this summer heat wave happened, we reached out to
Speaker 1: this group of over four hundred Texas businesses and posed
Speaker 1: to them the question, you know, did the summer heat
Speaker 1: wave have any impact on your business? And nearly a
Speaker 1: quarter of them said that it had a negative impact
Speaker 1: on either their production if they were a manufacturer, or
Speaker 1: their revenue if they were a services firm.
Speaker 2: For restaurants and stores, that downturn was largely driven by
Speaker 2: lower foot traffic. In fact, a Houston restaurant noted that
Speaker 2: it was the worst from a customer traffic standpoint than
Speaker 2: they'd experienced since they opened in nineteen sixty seven. For
Speaker 2: manufacturers producing things like food and electronics, it wasn't demand
Speaker 2: that took the hit.
Speaker 1: Their lost revenue came from lower productivity, lower labor productivity,
Speaker 1: temperature sensitive work sites, and so these manufacturing companies were
Speaker 1: having to give workers more breaks, you know, provide a
Speaker 1: lot more water, maybe pull back from outside, and sort
Speaker 1: of exertion roles whenever it was so hot.
Speaker 2: On top of bringing in less money, small businesses are
Speaker 2: also spending more cranking their acs just like the rest
Speaker 2: of us, and dealing with surging electricity costs. Last summer
Speaker 2: in Texas, the price of electric tricity, by some measures,
Speaker 2: spiked four times. The state is in a unique position
Speaker 2: because it has its own power grid. That means there's
Speaker 2: no way to supplement it with power from the rest
Speaker 2: of the country when the state's electricity demand suddenly shoots up.
Speaker 2: In twenty twenty three, electricity demand in Texas went above
Speaker 2: eighty thousand megawats an hour for the first time, and
Speaker 2: not just once. It happened forty two times. Just look
Speaker 2: at Houston. The temperature there hit one hundred degrees or
Speaker 2: higher for forty five days.
Speaker 4: So what happens is that the grid regulator asks us
Speaker 4: to reduce our use of electricity.
Speaker 2: Bloomberg's Katerina Sarareva.
Speaker 4: Again, without electricity, you can't do anything. So if your
Speaker 4: electricity gets cut because we're having rolling blackouts because the
Speaker 4: grid is overwhelmed, or total blackouts where you don't have
Speaker 4: electricity for a few days, it has huge ramifications on
Speaker 4: your production capabilities.
Speaker 2: Katerina says, the city of Houston has taken steps to
Speaker 2: mitigate the negative effects of the heat.
Speaker 4: So, for example, the city has embarked on a big
Speaker 4: initiative to try to plant more trees, not just for
Speaker 4: absorbing carbon but for providing that shade, that really is
Speaker 4: a big relief.
Speaker 2: They also turned city libraries into cooling centers on the
Speaker 2: weekends and encourage residents to stay indoors. But a lot
Speaker 2: of the steps required to make businesses more resilient to
Speaker 2: extreme heat or landing on the plates of individual business owners,
Speaker 2: and this year's first heat wave is already underway in
Speaker 2: Texas and is expected to spread to the southeast. After
Speaker 2: the break. We hear about how small businesses around the
Speaker 2: country have tried to respond to rising temperatures and what
Speaker 2: local and federal government could do to help them survive
Speaker 2: these challenges. Part of being a small business owner is
Speaker 2: rolling with the punch.
Speaker 1: I think a lot of these companies, especially after last summer,
Speaker 1: are coming up with ways to adapt.
Speaker 2: That's Emily Kerr from the Dallas Fed.
Speaker 1: Adding more shade as an example of you know, whether
Speaker 1: it's a theme park or a restaurant that has that
Speaker 1: door seating. Small businesses especially are incredibly resilient and have
Speaker 1: found ways to pivot their business model, adapt to a
Speaker 1: changing environment and find ways to get through.
Speaker 2: At Palmer Lane Maple in Jericho, Vermont, Colleen Palmer sells
Speaker 2: a local summer staple maple flavored soft.
Speaker 6: Serve that in Vermont we affectionately call creamies.
Speaker 2: Generally, summer heat is good for the ice cream business,
Speaker 2: but not if the temperature gets too high.
Speaker 6: If it hits like mid nineties, it's too hot. Nope,
Speaker 6: vermont rous will stay home.
Speaker 2: Ninety degrees in Vermont isn't ninety degrees in Houston. Vermont
Speaker 2: typically sees summer highs around eighty degrees. Most buildings don't
Speaker 2: even have central air conditioning. People aren't used to extreme heat.
Speaker 2: Colleen and says that means she needs to stay nimble.
Speaker 6: We watch the weather religiously to know how to plan.
Speaker 6: How many staff do I need that day, how much
Speaker 6: mix do I need to order for the week. We
Speaker 6: may find that it's going to be really slow in
Speaker 6: the afternoon because that's the hottest part, but the evening
Speaker 6: people will come out because it's cool down a little bit.
Speaker 6: So we really just kind of adjust based on the weather.
Speaker 2: But as Bloomberg' Katerina s Airava says, sometimes being able
Speaker 2: to adapt requires upfront investment.
Speaker 4: For restaurants, it's putting in big fans on the patios,
Speaker 4: water misters, things like that. That if you had a
Speaker 4: state program that might help subsidize some of that, right,
Speaker 4: cover some of those costs of installing those things.
Speaker 2: The government recognizes this and it's trying to support these businesses.
Speaker 2: The Small Business Administration offers a program that allows companies
Speaker 2: who have suffered from weather disasters to apply for loans.
Speaker 4: So these are loans that have a lower interest rate
Speaker 4: than normal that businesses can taped to kind of try
Speaker 4: to mitigate some of these losses in revenue.
Speaker 2: Think about it like the mom and pop loans from
Speaker 2: the height of COVID, only this time it's not a
Speaker 2: pandemic that's threatening business, it's the heat. But not everyone
Speaker 2: can access these loans. You have to meet certain criteria
Speaker 2: and the government needs to declare a disaster in your state.
Speaker 2: And for some businesses, even a low interest loan wouldn't
Speaker 2: be a quick fix. Brad Ervic ownes cherry shack orchard
Speaker 2: pick your own fruit farm near Spokane, Washington. The Pacific
Speaker 2: Northwest isn't a region known for extreme heat, but that's changing.
Speaker 7: We've been doing it for seventeen years and when we
Speaker 7: started out, you know, you just have the normal summer
Speaker 7: heat and go away. Now it just seems to be
Speaker 7: very dry and high heat for almost all summer, like
Speaker 7: one hundred and five for many days in a row.
Speaker 2: Brad says that keeps customers from coming out to pick fruit.
Speaker 7: It's not like I want to go outside and pick
Speaker 7: the fruit. And of course you have the.
Speaker 2: Fires, wildfires in the Pacific Northwest.
Speaker 7: That's probably the biggest impact is the smoke for people
Speaker 7: coming out, it's horrible. I mean there's times that you
Speaker 7: can't see probably forty feet in Coronium.
Speaker 2: All this unpredictable weather, it's bad for crops.
Speaker 7: Well, we lost all our peaches and probably half the cherries.
Speaker 2: That's because this winter was unseasonably warm. Then a cold
Speaker 2: snap came in and killed a lot of Brod's fruit,
Speaker 2: which raises the question how do you begin to recoup
Speaker 2: that kind of loss.
Speaker 7: You don't there's no recooping.
Speaker 2: Brod says that he thinks the government could be doing
Speaker 2: more to help out small business owners like him. He
Speaker 2: hopes he'll be able to make up for his losses
Speaker 2: with a busy fall season. They have a pumpkin patch
Speaker 2: and a good apple crop, but Brod says that it's
Speaker 2: not clear what will happen if temperatures just keep climbing
Speaker 2: year after year.
Speaker 7: I don't know, it's a question that's looming.
Speaker 2: I guess the Small Business Administration's loan program is a start,
Speaker 2: but it's worth noting that during COVID they offered the
Speaker 2: option to apply for loan forgiveness, as in money that
Speaker 2: didn't need to be paid back that is not available
Speaker 2: for weather related events.
Speaker 4: Howwether it might not be something that we traditionally have
Speaker 4: thought about as something that can weigh on the economy,
Speaker 4: but it's becoming a parent in these last few years
Speaker 4: that it is a major component of what's going on economically.
Speaker 2: Thanks for listening to The Big Take DC podcast from
Speaker 2: Bloomberg News. I'm Salaia Mosen. This episode was produced by
Speaker 2: Julia Press. It was mixed by Blake Maples, fact checked
Speaker 2: by Audriana Tapia, and edited by Aaron Edwards and Wendy Benjaminson,
Speaker 2: who also provides editorial direction with Elizabeth Ponso. Naomi Shaban
Speaker 2: is our senior producer, Nicole Beemster bow Or is our
Speaker 2: executive producer, and Sage Bauman is Bloomberg's head of Podcasts.
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