Attacks' Economic Impact Lingers, Unevenly

A year ago, as endless images of the World Trade Center's destruction seared their minds, consumers stopped consuming, investors stopped investing and travelers stopped traveling, at least by plane.

Traders dumped stocks and scores of companies slashed thousands of jobs, and many predicted that the terror attacks would drive an already fragile world economy into a deep recession.

But a year after terrorists attacked the trade center, the Pentagon -- and by extension, the economy -- the impact has not proven to be nearly as deep or as lasting as was feared.

Massive injections of liquidity into financial markets and prompt interest rates cuts by central banks across the globe, bringing borrowing costs to their lowest for decades, helped the world's main economies avoid a prolonged slump.

The giant United States economy did flirt with recession, and worries still remain -- but the toll has proved disparate, inflicting the heaviest damage on sectors such as travel and tourism while leaving others unscathed. And it turns out events before and after have played a far larger role in shaping the economy than the attacks.

Moreover, as if to emphasize its resilience, the U.S. economy is poised to show the strongest growth of any of the world's leading economies this year although, in truth, it is not being offered much competition at the moment.

"I would say the impact has been less than we had initially thought in terms of economic contraction," said Gus Faucher, a senior economist with Economy.com, a research firm in West Chester, Pa. "It's a contributing factor to the weak economy, but it's not the primary factor."

Sizing up the impact of the attacks is complicated because the economy was already in a recession before last September. In the months since, it has been buffeted by other crises, including the collapse of Enron and a host of other corporate scandals, severe problems in the telecommunications industry, and the drop-off in the stock market.

"Economically, the stock market setback may have had more of an impact than the terrorist attacks because it shaved some $7 trillion from our wealth," said Sung Won Sohn, an economist with Wells Fargo and Co. in Minneapolis.

Some of the expectations that shaped economic forecasts immediately after the attacks, particularly fears of a long war in Afghanistan with heavy American casualties, did not come to pass, said Ross DeVol, director of regional studies for the Millken Institute in Santa Barbara, Calif.

The think tank early this year estimated the attacks would result in the elimination of 1.6 million jobs nationwide. But DeVol says now the number will probably be 1.2 million or less, most concentrated in industries like air travel and tourism, or in New York City.

The uneven impact means that assessments of the damage vary by vantage point.

"The attacks certainly accelerated the action," said Terry Mercer, a technical illustrator for Boeing Corp., who's been unable to find work since the aerospace giant eliminated his job and 5,000 others from its Wichita, Kan., operations. "But everybody's feeling was that it (some cuts) was going to be coming anyway. We didn't have a lot of work even before the attacks."

The landscape looks very different to home builder Bob Simmons of McLean, Va., who said he was prepared for the worst last fall -- but never had time to stop and wait for it.

"For me, it's almost like a recap of last August except we have about 10 percent more sales," said Simmons, who builds homes in the suburbs of Washington.

Economists say the healthy housing market shows how a variety of factors helped mitigate the damage of Sept. 11.

Consumers, told one of the best things they could for their nation was to shop, did just that. Record low interest rates kept families buying homes, and refinancing mortgages put cash in their pockets for other purchases. Detroit's zero-percent financing for new cars late last year captured consumers' attention. Government spending pumped additional money into the economy.

"Who knows what the psychology was, but (the attack) was not as big a blow as we were expecting," said Economy.com's Faucher. "People still went out to dinner, they still went out to the mall to buy things and things just held up better than expected."

The Associated Press contributed to this report.