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World economic effects arising from the September 11, 2001 attacks
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Major economic effects arose from September 11, 2001 attacks, with initial shock causing global stock markets to drop sharply.
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The opening of the New York Stock Exchange (NYSE) was delayed after the first plane crashed into the World Trade Center's north tower, and trading for the day cancelled after the second plane crashed into the South Tower. NASDAQ also cancelled trading. The London Stock Exchange and other stock exchanges were also evacuated. The New York Stock exchanges remained closed until the following Monday. This was the third time in history that the NYSE experienced prolonged closure, and first time since March 1933. The NYSE also shut down for a few months at the beginning of World War I.[1]
Trading on the United States bond market ceased, with the leading government bond trader, Cantor Fitzgerald based in the World Trade Center.[1]
The Federal Reserve issued a statement, saying it was "open and operating. The discount window is available to meet liquidity needs."[2]. Federal Reserve Governor Roger Ferguson, the only Governor in Washington DC on the day of the attacks, has described in detail this and the other actions that the Fed undertook to maintain a stable economy and offset potential disruptions arising in the financial system [3].
Gold prices spiked upwards, from $215.50 to $287 an ounce in London trading.[1] Oil prices also spiked upwards.[4] Gas prices in the United States also briefly shot up.
Currency trading continued, with the United States dollar falling sharply against the Euro, British pound, and Japanese yen.[1] The next day, European stock markets fell sharply, including a 4.6% decline in Spain and 8.5% decline in Germany.[1] Stocks in the Latin American markets also plunged, with a 9.2% drop in Brazil, 5.2% drop in Argentina, and 5.6% decline in Mexico, before trading was halted.[1]
In international and domestic markets, stocks of companies in some sectors were hit particularly hard. Travel and entertainment stocks fell, while communications, pharmaceutical and military/defense stocks rose. Online travel agencies particularly suffered, as they cater to leisure travel.
Shares of major reinsurers, including Swiss Re and Baloise Insurance Group dropped by more than 10%, while shares of Swiss Life dropped 7.8%.[5]
Flights were grounded in various places across the United States and Canada that did not necessarily have the operational support in place, such as dedicated ground crews. A large number of transatlantic flights landed in Gander in Newfoundland and in Halifax, Nova Scotia, with the logistics handled by Transport Canada in Operation Yellow Ribbon. To help with immediate needs for victims' families, United Airlines and American Airlines both provided initial payments of $25,000.[6] The airlines were also required to refund ticket purchases for anyone unable to fly.[6]
Share prices of airlines and airplane manufacturers plummeted after the attacks. Midway Airlines, already on the brink of bankruptcy, shut down operations almost immediately afterwards. Other airlines were threatened with bankruptcy. Tens of thousands of layoffs were announced in the following week.
Tourism in New York City plummeted, causing massive losses in a sector which employed 280,000 people and generated $25 billion per year. In the week following the attack, hotel occupancy fell below 40 percent, and 3000 employees were laid off. Tourism and hotel occupancy also fell drastically across the nation.
The overwhelming majority of economic effects were not a direct result of the terrorist attacks, but a consequence of the subsequent actions of Western people and their governments. This is particularly so with regard to long-term economic changes, such as the worldwide decline in the aviation industry, which still shows no sign of recovering. Nevertheless, it is convenient to discuss the effects of the attacks themselves and the effects of later actions by Western economies together.
Numerous investment firms housed in the World Trade Center lost hundreds of employees, including Cantor Fitzgerald, Keefe, Bruyette and Woods and the insurance brokerages Marsh & McLennan Companies.
The Times reported on September 18th that investigations were under way into the unusually large numbers of shares in insurance companies and airlines sold off before the attack, in London, Italy, Germany, Japan, Switzerland, France and the US.
ScamBusters reported that some email pleas for relief funds for victims of the attacks were simply scams to procure credit card numbers from inexperienced internet users. ScamBusters offered tips to help donors ensure their contributions went to the right places.
The New York City projected budget deficit for the 2003 fiscal year which begins July 2002 ballooned from $2-$2.5 billion to approximately $4 billion, though most direct expenses related to the rescue and recovery effort are to be covered by the expected $40 billion in federal aid. However, the related drop in tourism and Lower Manhattan tax revenue is not expected to be covered.
- ^ a b c d e f Norris, Floyd, Jonathan Fuerbringer. "Stocks Tumble Abroad; Exchanges in New York Never Opened for the Day", The New York Times, September 12, 2001.
- ^ Federal Reserve Release. Federal Reserve (September 11, 2001).
- ^ September 11, the Federal Reserve, and the Financial System.
- ^ Stevenson, Richard W., Stephen Labaton. "The Financial World Is Left Reeling by Attack", The New York Times, September 12, 2001.
- ^ Sorkin, Andrew Ross, Simon Romero. "Reinsurance Companies Wait to Sort Out Cost of Damages", The New York Times, September 12, 2001.
- ^ a b Zuckerman, Laurence. "For the First Time, the Nation's Entire Airspace Is Shut Down", The New York Times, September 12, 2001.
- Attack Gave a Devastating Shove to the City's Teetering Economy, The New York Times, September 8, 2002
- As Companies Scatter, Doubts on Return of Financial District, The New York Times, September 16, 2002