Down but not out: the U.S. economy after September 11
Evan F. Koenig
The terrorist attacks of September 11 have profoundly affected the well-being of U.S. citizens. Our sense of invulnerability is gone. Comparable events are the Arab oil embargo of October 1973?which challenged our assumptions about the continued availability of abundant, cheap energy - and the October 1957 Sputnik launch - which raised fears of intercontinental missile attack. Both of those shocks triggered important changes in spending priorities. Both hit a U.S. economy that had already been slowing. Both were accompanied or promptly followed by recessions. ; We can never know, with certainty, how the economy would have evolved had the Sputnik launch, the oil embargo or the September 11 attacks never occurred. Such events are rare, and each has unique aspects. Moreover, our understanding of the terrorist threat and the measures necessary to combat it is still developing. With this caveat in mind, it appears that the September 11 terrorist attacks subtracted perhaps 1 percentage point from annualized third-quarter GDP growth, making what would have been a small, positive number small and negative. Spillover from the attacks makes a much more significant GDP decline likely in the current quarter. In contrast, the outlook for the first half of 2002 has been little-affected. Unfortunately, that outlook calls for output growth so sluggish that jobs will shrink and the unemployment rate will continue to rise.
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