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II. The September 11, 2001 Terrorist Attacks

In the months prior to September 11, the U.S. economy was already in the midst of a downturn, with New York and other major metros experiencing job contraction. The September 11 terrorist attacks acted as a, "shock to the [U.S.] economy, worsening the underlying deteriorating conditions and leading the NBER (National Bureau of Economic Research) Business Cycle Data Committee to declare that the economy was in a recession, which began in March 2001" (DeVol, et.al., 2002).

The immediate impacts of the terrorist attacks were immense, especially in New York City. In addition to the death toll of nearly 3,000, approximately 30 million square feet of commercial office space (roughly equivalent to the size of Miami's central business district), 75,000 phone lines, 19,600 square miles of phone cable, and, "enough concrete to build a five-foot wide sidewalk from Manhattan to Washington," were lost or severely damaged in the attacks (Tully, 2001). An estimated 1,300 businesses, involving 80,000 workers, were dislocated (Lyne, 2001a).

Property damage alone in New York City was estimated to be in the $10 billion -- $13 billion range. The New York City Comptroller's report stated that it will cost $218 billion to, "replace the buildings, infrastructure and tenant assets as a result of September 11" (Thompson, 2002). Overall insurance claims (life, property, workers' compensation, and business disruption) were estimated to be in the range of $100 billion -- roughly four times those resulting from Hurricane Andrew in 1992 (Jones, 2002).

Exacerbated by national and global recessionary trends, New York City reportedly lost 125,000 jobs in the fourth quarter of 2001 (79,000 in October alone; New York City Partnership and Chamber of Commerce, 2002). New York's two airports were especially hard hit (Kennedy, 2002). During the twelve months following September 2001, 16.5 percent of the city's airport-linked jobs disappeared (Greenhouse, 2002). Lower-wage workers absorbed much of this job loss. Thousands of others, including garment workers, travel agents, and retail shop assistants, experienced wage cuts (Bagli, 2002a; Fong, 2002).

The Milken Institute estimated the terrorist attacks' impact on the entire U.S. metropolitan system (DeVol, et.al., 2002). Using a regional econometric input-output model, Milken researchers first estimated employment changes given existing conditions and assuming that the attacks did not occur. Following this baseline analysis, they factored in the anticipated impacts of 9/11 on various sectors of metro economies. The difference in the two sets of estimates, the Milken researchers contend, reflects the effects of the terrorist attacks on U.S. metro economies.

Table 1 lists the 50 metro areas that are likely to be most adversely affected by the 9/11 terrorist attacks. Collectively, these metro areas are forecasted to lose 1.2 million jobs between 2002 and 2004--527,000 in 2002, 407,000 in 2003, and 243,000 in 2004. New York city and other global gateways, including Los Angeles and Chicago, are projected to suffer the greatest job losses. Other major airport hubs (Atlanta, Detroit, Minneapolis, and Dallas), aircraft and parts manufacturing centers (Seattle), and tourism and entertainment centers (Las Vegas and Orlando) are also projected to experience significant job losses (Table 1). Much of this is tied to declines in business and tourist air travel.

As we noted earlier, three specific post-9/11 outcomes: (1) constraints on international commerce, (2) immigration and foreigner entry reforms, and (3) re-evaluations of corporate locational costs and risks following the attacks-- have the potential to exacerbate urban job losses, or at least prevent full recovery. Each of these threats is elaborated in the following section.

TABLE 1: The 50 Metro Areas Projected to Lose the Most as a Result of 9/11

Absolute Job Losses (In Thousands)
  2002 2003 2004 Total
New York-Newark, NY-NJ-PA -67.32 -49.01 -35.02 -151.35
Los Angeles-Long Beach, CA -32.31 -25.2 -15.97 -73.48
Chicago, IL -30.36 -21.38 -11.98 -63.72
Las Vegas, NV-AZ -21.21 -14.65 -4.98 -40.84
Seattle-Bellevue-Everett, WA -19.66 -17.67 -13.15 -50.48
Washington, DC-MD-VA-WV -17.02 -12.26 -6.43 -35.71
Boston, MA -15.87 -11.93 -6.71 -34.51
Atlanta, GA -15.58 -11.64 -6.63 -33.85
Orlando, FL -14.45 -10.56 -4.96 -29.97
Dallas, TX -14.31 -11.11 -6.65 -32.07
Phoenix-Mesa, AZ -13.68 -10.4 -6.27 -30.35
Houston, TX -13.19 -9.21 -5.41 -27.81
Orange County, CA -12.14 -9.33 -5.42 -26.89
Detroit, MI -12.1 -9.29 -5.44 -26.83
Philadelphia, PA-NJ -12 -9.19 -5.26 -26.45
San Francisco, CA -9.86 -7.92 -4.29 -22.07
St. Louis, MO-IL -10.89 -8.82 -5.57 -25.28
Minneapolis-St. Paul, MN-WI -10.52 -7.77 -4.4 -22.69
Fort Worth-Arlington, TX -9.98 -7.18 -4.45 -21.61
San Diego, CA -9.86 -7.92 -4.29 -22.07
Miami, FL -9.82 -6.81 -3.09 -19.72
Denver, CO -8.34 -5.86 -3.06 -17.26
Baltimore, MD -7.84 -5.72 -3.35 -16.91
Pittsburgh, PA -7.25 -5.01 -2.86 -15.12
Tampa-St. Petersburg-Clearwater, FL -6.91 -5.29 -2.83 -15.03
Cincinnati, OH-KY-IN -6.58 -5.36 -3.41 -15.35
Riverside-San Bernadino, CA -6.47 -5.36 -2.95 -14.78
Kansas City, MO-KS -6.42 -4.81 -2.56 -13.79
Oakland, CA -6.32 -4.68 -2.54 -13.54
Nassau-Suffolk, NY -6.24 -4.84 -2.8 -13.88
Indianapolis, IN -6.23 -4.85 -2.88 -13.96
Portland-Vancouver, OR-WA -5.86 -4.52 -2.53 -12.91
Newark, NJ -5.84 -4.17 -2.38 -12.39
Cleveland-Lorain-Elyria, OH -5.83 -4.83 -2.73 -13.39
San Antonio, TX -5.75 -4.59 -2.62 -12.96
Milwaukee-Waukesha, WI -5.74 -4.19 -2.36 -12.29
Honolulu, HI -5.7 -4.71 -3.94 -14.35
Wichita, KS -5.65 -6.2 -5.27 -17.12
New Orleans, LA -5.2 -3.97 -1.92 -11.09
Norfolk-Virginia Beach, VA-NC -5 -3.65 -1.88 -10.53
Hartford, CT 4.96 -4.52 -3.01 -2.57
Louisville, KY-IN -4.9 -3.18 -1.94 -10.02
Nashville, TN -4.87 -3.73 -1.99 -10.59
San Jose, CA -4.83 -3.24 -1.58 -9.65
Charlotte-Gastonia-Rock Hill, NC-SC -4.82 -3.62 -2.03 -10.47
Salt Lake City-Ogden, UT -4.82 -3.5 -1.84 -10.16
New Haven-Stamford, CT -4.76 -4.24 -2.88 -11.88
Columbus, OH -4.38 -3.71 -2.02 -10.11
Fort Lauderdale, FL -4.18 -3.26 -1.68 -9.12
Atlantic-Cape May, NJ -3.17 -3.03 -2.72 -8.92
Total -527.07 -407.89 -242.93 -1177.89
Average -10.54 -8.16 -4.86 -23.56

Source: DeVol, et al., 2002

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