After 10-year Remembrances Commence, a Look Back on Economic Impact of 9/11

Yesterday morning, I lied in bed watching the myriad newscasts reflecting back on September 11, 2001 – a day that will forever shape our nation’s history. It was certainly a sight to see President Obama walking alongside his immediate predecessor, President Bush, as the two took in the new waterfall memorials at Ground Zero. Then, they stood side-by-side on stage as family members of the 9/11 victims read the names of all those lost in the attacks.

As I watched the footage, it struck me how little I remembered about the immediate aftermath of the WTC towers’ collapse. I became engulfed in the news coverage as I heard stories of heartbreak, triumph, and perseverance. And yet, while I watched coverage, I couldn’t help but ask myself:

What was the economic impact of 9/11?

I pulled out my laptop to try to find the answer. After a bit of Googling, I came across “The Economic Effects of 9/11: A Retrospective Assessment,” authored by Gail Makinen in a special report for Congress, published on September 27, 2002 – just over a year after the attacks happened.

To be clear, Makinen states that this is by no means a long-term economic impact study. This was just a report that looks at the economic impact in the immediate months following 9/11. The report is lengthy, but a worthwhile read. Here are some of the highlights that I found most interesting:

• While there were significant impacts on the economies of New York City and Washington, D.C., there was not a widespread impact on the overall national economy. The impact was localized.
• For three days following the attacks, the Federal Reserve added $100 billion per day in liquidity to reassure businesses that it was still in business.
• At the time, the insurance industry had its largest property/casualty claim in its history with claims estimated around $40 billion.
• Nearly 18,000 (mostly small-) businesses were dislocated, disrupted or destroyed by 9/11. Most of these were in and around the World Trade Center Complex.
• The Small Business Administration (SBA) granted 5,254 loans to businesses around the World Trade Center complex in the year following the attacks. The average size of the loan was $82,000.  There were 132 SBA-approved loans granted in Virginia following the attacks, with the average loan size being $125,800.
• $700 million in special Community Development Block Grants were given to the Lower Manhattan Development Corporation to help rebuild.
• New York City’s Gross City Product (GCP) was estimated to have been reduced by $27.3 billion of the last 3 months of 2001 and all of 2002.
• It is estimated that NYC lost over $3 billion in taxes from 2002 to 2003, severely hampering the city’s budget. In response, the federal government provided NYC with three sets of aid:

                   -  $11.2 billion for debris removal and direct aid to affected individuals and businesses;

                   -  $5 billion in economic development incentives; and

                   -  $5.5 billion for infrastructure projects.

• Nearly 130,000 employees were displaced in the aftermath of 9/11, representing 462 mass layoffs that were directly attributable to the attacks. This compounded the recession that America was already facing at the time of the attacks.

Again, these statistics do not look at the long-term economic impact of 9/11.  Nonetheless, it’s astonishing to see the short-term impact, especially as it pertains to New York City’s local economy. Given that our cities are the drivers of our world’s economic growth, it’s amazing that the widespread economic impact on our nation’s largest city (NYC) did not have a drastic effect on our national economy.

Readers: Did you or anyone you know lose a job as a result of 9/11?  And business owners: What impact (if any) did you feel from the attacks? Share your stories with us!

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BY Amanda Maher on September 12th, 2011

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