In Hot Water? The Macroeconomic Impacts of El Niño

Despite their potentially major impacts, little is known about how El Niño impact the U.S. economy. El Niños are distinct from other commonly studied weather shocks because they are a global phenomenon, unfold over a period of months, can be forecast months in advance, are relatively infrequent, and have very different effects on weather outcomes depending on the time of year and region. These features make traditional analytical methods ill-suited to studying the economic impacts of El Niño events. In this paper I use a new approach to estimating the impulse response functions of El Niños. I find that El Niños pose material upside risk for PCE prices and employment. The longer-run price effects are driven by core services and food prices and depend on whether La Niñas follow El Niños, a very common occurrence. After modest offsetting initial effects, employment increases are widespread in terms of both sectors and states in the year following the El Niño. These results indicate El Niños can have material impacts on the US economy even though it is neither tropical nor agriculturally focused.

Suggested citation:

Roth Tran, Brigitte 2026. "In Hot Water? The Macroeconomic Impacts of El Niño." Federal Reserve Bank of San Francisco Working Paper 2026-21. https://doi.org/10.24148/wp2026-21