The U.S. economy after 9/11

Robert T. Parry, President and Chief Executive Officer, the U.S. Economy after September 11: FRBSF Economic Letter

2001-35; December 7, 2001

Taken from: Lecture by Robert T. Parry, President and CEO of the Federal Reserve Bank of San Francisco, on November 19, 2001, at the 24th Annual Real Estate and Economics Symposium sponsored by U.C. Berkeley's Fisher Center for Real Estate and Urban Economics.

This article is divided into five important and distinct sections. Each section deals with the problem of economy after September 11. Parry first deals with the background of economic slowdown following 9/11. He states that the economy was already in a sluggish position when the tragedy struck. Therefore to actually accuse 9/11 for economic problems would be rather unfair and incorrect. "By mid-2000, then, there was a pullback." The author explains that prior to the tragedy, the economic situation was visibly negative. It was only when growth was about to recover that September 11 came. This section is followed by a summary of Federal Reserve's actions following the attacks. It includes the reasons for fun rate-cuts and measures that were taken to keep foreign banks afloat. The author claims that "These actions helped ensure that the financial markets could function efficiently as soon as possible, thereby minimizing disruptions to economic activity." The third section summarizes the effects of September 11 in the short run. The last two sections are analysis of current situation and ways to achieve economic recovery.

Response: This article is an interesting and highly informative piece on the economic effects and solutions post 9/11. The author has not tried to downplay the impact of September 11, but has clearly explained how unemployment soared and consumer spending dipped following the tragedy. But the author has also focused on the positive side of the picture as he feels that our economic structure is such that it can absorb such shocks. "...our economy has a resilient structure -- financial markets are deregulated, the banking system is sound, and our labor markets are flexible -- so we can adjust relatively quickly to the kinds of shocks we've recently suffered." There is great deal of information and no-nonsense advice available in this article.

Michael L. Dolfman, 9/11 and the New York City economy: a borough-by-borough analysis: Monthly Labor Review June, 2004

Summary: This article precisely talks about the economic effects of September 11 on New York City. The author initially focuses on the New York City economic structure and explains how its import and exports sectors are built. It then goes on to analyze the impact of September 11 on various important boroughs such as Manhattan, Queens, Brooklyn, Bronx etc. The article talks at great length about every borough and how it suffered in the wake of September 11. For example writing about Manhattan, the author explains that "The terrorist attack of 9/11 cost the Manhattan economy 238,725 lost job months (the equivalent of 59,681 jobs each month for 4 months) and $2,189,929,660 in lost wages." Similarly the impact on Queens is summarized in these words: "The Queens economy began to lose jobs in September 2001, and the losses extended through November 2002, a 14-month period. A breakdown of specific key sectors, given in table 9, points out the differing effects of 9/11, in terms of lost jobs and lost wages, on the Queens economy."

Response: this article is very well researched and must be read by those who really want to know how September 11 affected the economy. Even though it precisely talks about New York City, what makes this a must-read is the fact that NY city economy represents a significant portion of United States economic structure. It is the most dynamic city and serves as the backbone of U.S. economy and thus this article proved very informative.

Robert W. Marsh, Factoring terrorism into the economic equation: When will the U.S. economy recover from September 11? Paper, Film, & Foil Converter Jan, 2002

Summary: This article is actually a precise summary of the immediate economic effects of terrorist attacks. The author feels that with massive job losses, airlines closing, wages coming down, the psychological effects of terrorist attacks were profound and it was for this reason that economic forecasting became difficult. "...business leadership is much more negative about the economy than consumers are. Unfortunately, they are in a position to make their pessimism a self-fulfilling prophecy Optimistic consumers aren't in a position to hire anybody Pessimistic managers can lay people off, and that is what is happening now."

Response: since this article appeared just a few months after the attacks, we get a clearer and better picture of immediate economic impact of September 11. The author has done a good job in summarizing the effects in a precise manner. If you need to know how exactly the businesses suffered after attacks and how quickly people lost jobs, this article should be consulted.

Economic Outlook - consumer confidence following attacks on September 11, American Demographics Dec 1, 2001

Summary: This article takes into account consumer confidence after September 11 which actually drives the economy and gives businesses a reason to prosper and grow. However after September 11, it was seen that consumer confidence continued to decline resulting in lower demand for good and equally slow supply of the same. The author has presented many facts and figures. Some important consumer indexes studies have also been cited. "According to the University of Michigan's monthly report on consumer sentiment, based on 500 interviews, consumer confidence fell to a rating of 81.8 in September, from 91.5 in August. The study shows that the attacks created a brief surge in confidence - up 4.7 points the week after the attack - followed by a deeper plunge (down 16.1 points the following week), though the rating was back up to 82.7 in October."

Response: looking at economic impact from consumer angle helps in understanding just how the economic structure is built and how each factor contributes to its growth. Consumers serve as the driving force of economy and when they start withdrawing from the markets, business lose incentives to produce and supply leading to a recession in the economy. This article helps in understanding how consumer confidence came down after September 11 and where it was placed right before the attacks. This article is a useful piece for everyone who needs to understand the impact 9/11 had on consumer confidence and how this in turn affected the economy.

The Economic effects of September 11

Editorial in Australian Financial Review (printed on September 11, 2002)

Summary: