The recent wildfires in Los Angeles are projected to negatively impact U.S. GDP growth by approximately 0.2 percentage points in the first quarter of 2025, according to Goldman Sachs.

These wildfires are becoming the most expensive climate disaster in U.S. history, with damages attributed to their scale and the high value of destroyed residential properties.

As of mid-January 2025, the fires have devastated over 160 square kilometers, resulted in 25 fatalities, destroyed around 12,000 buildings, and forced the evacuation of 180,000 people.

Insured losses from the wildfires are estimated to reach up to $30 billion, while total economic losses could soar as high as $275 billion.

In January 2025, the wildfires are expected to reduce nonfarm payroll growth by about 15,000 to 25,000 jobs, despite only 0.5% of California's population being under evacuation orders.

Jeffrey Mezger, CEO of KB Home, expressed confidence that rebuilding efforts will not lead to inflationary pressures on labor and materials due to sufficient capacity to meet demand.

Goldman Sachs does not anticipate a significant increase in unemployment claims resulting from the wildfires, as initial claims data is expected to remain low.

Analysts believe that the impact of higher insurance costs on inflation will be minimal, given that homeowners' insurance constitutes only a small fraction of the Personal Consumption Expenditures price index.

Forecasts suggest a minimal short-term effect on national GDP growth, employment, and inflation levels due to the wildfires.

The wildfires struck while the U.S. economy was on solid footing, with inflation at 2.7% in November 2024, as the country prepares for a new presidential administration.

Concerns over inflation have been prevalent, but Goldman Sachs does not foresee a significant impact on inflation from the wildfires.

The estimated damage from the wildfires in Los Angeles County could potentially make it the costliest wildfire in U.S. history.