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Investing.com -- The devastating wildfires raging across Los Angeles are the latest in a series of economic and structural challenges confronting the city, Wells Fargo (NYSE:WFC) said, pointing to risks to housing, insurance, and local employment.
WF noted that the fires, which have destroyed thousands of homes and displaced residents, will likely exacerbate the region’s ongoing housing crisis. Los Angeles was already dealing with low housing supply and rising costs. The destruction of thousands of properties will only intensify these pressures.
"The months ahead are highly uncertain, yet the fallout from the wildfires is likely to reverberate through the Los Angeles economy for years to come," economist at Wells Fargo wrote.
Insurance markets are also expected to feel the strain, as insurers face mounting claims. There could be hardening of the insurance market in California, with rising premiums and reduced coverage availability, which could push some homeowners out of the region.
Beyond property damage, the wildfires have disrupted business activity and employment, particularly in the tourism and entertainment sectors.
While rebuilding efforts may provide a temporary boost to construction jobs, other industries are likely to see economic fallout from the disaster.
The fires come amid broader economic challenges for Los Angeles, including lingering effects from the COVID-19 pandemic, a slower-than-expected recovery in Hollywood following last year’s labor strikes, and persistent inflationary pressures.
Wells Fargo expects federal disaster aid to help mitigate some of the immediate economic impact but warns that long-term structural issues—such as climate risk, housing affordability, and insurance constraints—will continue to weigh on the city’s economic outlook.
