NCPA - National Center for Policy Analysis

Vast Economic Changes Four Weeks After

October 9, 2001

The terrorist attacks of Sept. 11 have altered the U.S. economy in ways many economists probably wouldn't have predicted a month ago.

The impact of greatly reduced travel on the airlines, hotels and the restaurant industry has been widely reported. But the ripples extend in perhaps unforseen ways to other industries as well.

  • The television industry, which broadcast news commercial-free for several days after the attacks, is estimated to have lost $700 million in advertising revenues -- and the future need to create new bureaus abroad, add new technology and broaden coverage could increase their budgets 25 percent to 35 percent over the next few years.
  • The dip in consumer confidence left automakers with the choice of either cutting production or trying to lure consumers with big discounts and promotional campaigns -- with Ford seemingly opting for the former and General Motors adopting the latter strategy.
  • In finance, insurance companies face insured losses estimated in a range of $40 billion to $70 billion -- and on Wall Street, initial public offerings of stock are said to have tumbled 88 percent from the average level of the first eight months of the year.
  • Oil demand is down, thanks to grounded airplanes and would-be travelers sticking close to home -- and the number of rigs actively drilling for oil and gas in the U.S. has fallen 10 percent since July.

Furthermore, state governments face budget difficulties due to swiftly escalating layoffs -- which are reducing state tax collections, while increasing unemployment compensation claims. The states also face mounting Medicaid payouts and pension funds jeopardized by a volatile stock market.

Source: Jon E. Hilsenrath, "Terror's Toll on the Economy," Wall Street Journal, October 9, 2001; Paul Magnusson, Ann Therese Palmer and Christopher Palmeri, "The Squeeze on the States Just Got Worse," Business Week, October 15, 2001.

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