U.S. Economy Defies Sept. 11 Attacks
NewsMax.com Wires Tuesday, March 12, 2002
WASHINGTON Six months after the devastating terror strikes of Sept. 11, the economic ripples of that day are at last starting to subside.
Economic news in recent weeks has pointed to the possible beginning of a recovery from the economic slowdown, which markedly deepened after the attacks. Now recent reports are showing that:
Manufacturing is starting to increase.
The nation's gross domestic product growth rate for the fourth
quarter of last year was higher than thought.
The unemployment report for February showed that job loss has
stabilized.
The markets responded with a notable jump. Expectations among economist are for solid economic growth this economic quarter, along with continuing growth going forward.
This wasn't the case, however, 180-plus days ago.
The terrorist attack on the World Trade Center and the Pentagon resulted in large-scale business and economic disruption. At the time, the effect was profound and immediate, though no dollar amount has yet been estimated for the total disruption.
The insurance cost alone from the resulting damage has been estimated to run into the billions of dollars, according to insurance experts. The U.S. government has pledged $21.4 billion toward helping rebuild lower Manhattan, including helping to revive business.
In one strike, all civil aviation was grounded, stranding thousands of passengers, almost all consumer activity completely halted for several days, and the chairman of the U.S. Securities and Exchange Commission, Harvey Pitt, said shortly after the attacks that trading on the financial markets would resume "as soon as it is practicable to do so." The Nasdaq stock market, the New York Stock Exchange and the American Stock Exchange all closed, along with other major U.S. markets. When they finally reopened the following midweek they dropped like a stone on worries of recession by investors.
Also, right after the attacks, and because of the unknown nature of the threat, skyscrapers and corporate headquarters were closed across the United States, along with a large number of government offices in Washington.
Meanwhile, the U.S. Federal Reserve, seeking to provide assurances that the nation's banking system was up and running despite an attack the disrupted the U.S. financial and economic system, said it stood ready to supply additional money to banks if needed.
"The recent evidence increasingly suggests that an economic expansion is already well under way, although an array of influences unique to this business cycle seems likely to moderate its speed," Federal Reserve Chairman Alan Greenspan said last week before a committee hearing on Capitol Hill.
The Fed chairman added that "tentative indications" suggest "the contraction phase of this business cycle has drawn to a close," and that recent economic data have provided "encouraging signs" that consumer and business demand "is strengthening."
Within the civilian airline sector of the economy, companies began conducting large-scale layoffs, as even after planes resumed flying, air travel dropped by around 50 percent. Already saddled with debt and other financial problems, the airlines were almost facing bankruptcy and hurried as a group to ask Capitol Hill for millions of dollars in financial assistance.
In turn, the drop in air travel rippled through the travel and tourism industry, with hotels and resorts suddenly going empty and hotel staff getting laid off.
At question as the United States faced the post-Sept. 11 economic prospects of the next several weeks and months was whether the attacks would plunge an already slowed U.S. economy into a recession that would continue well into 2002.
The latest preliminary economic evidence, however, is that the U.S. economy, though taking a heavy economic hit, began to turn around during the fourth quarter. And some sectors, such as housing, never did drop, in part helped by the successive lending rate cuts by the Fed.
A wildcard the helped to propel fourth-quarter GDP into a positive 1.4 percent was auto companies' decision to offer sweetheart incentives - no interest loans, large rebates - to keep auto sales up. Sales were record, though they may prove costly to the automakers.
Nevertheless, select automakers have been announcing a second round of attractive sales incentives for spring.
The markets have hailed the recent economic news. After a steep drop in fall, the blue-chip Dow and the high-tech Nasdaq have rallied for a comeback. From their Sept. 21 low, the Dow is up 28 percent, and the Nasdaq is up 36 percent.
But, while a recent report of manufacturing, from the Institute of Supply of Management, reported that manufacturing was at last on an upswing after a year-and-a-half of contractions, corporate heads are still cautious.
It all comes back to the average worker and consumers, whose spending drives two-thirds of GDP, whether the economy has turned a corner and is headed upward. If consumer spending continues to be sustainable, then business will follow.
Meanwhile, initial jitters about yet another attack on the U.S. mainland have abated, boosting consumer sentiment considerably. If there were a terrorist strike in the country, however, it could cripple the still nascent economic recovery.
News analysis by T.K. Maloy, UPI deputy business editor.
Copyright 2002 by United Press International.
All rights reserved.
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