The September 11, 2001 terrorist attacks against the United States were the most surprising and the most terrible in American history: 2,974 people died and 24 others are still listed as missing.

This is without taking into account the losses of 40 billion USD in insurance, 14 billion USD for the private sector, 1.5 billion USD for state and local government enterprises, 0.7 billion USD for the US federal government, 11 billion USD for the rescue and clean-up operations, where the latter is shared between the private and the public sectors and other losses on properties particularly in New York City. The goal of this paper is to analyze the effects, positive and/or negative, of the "nine-eleven" attacks on the American economy. To attain this goal, the focus will first be on examining the:

  - financial markets,  

- most affected sectors (airlines, insurance, agriculture/food and small businesses),

 - consumers' changed behaviors,

 - level of unemployment,   - national defense system and  

- loss incurred by New York City

Ι - Financial markets  

September 11, 2001 was an event that disturbed the U.S. stock markets and its effects affected many financial markets. On that day, the New York Stock Exchange (NYSE) remained closed for the third time in the history after two planes crashed into the World Trade Center twin towers. The New York Mercantile Exchange was also closed for a week after the attacks. Despite the terrible human losses (one quarter of all the victims were employees of the NYSE), and the considerable damage to physical and electronic

Infrastructures, all the major financial markets were working normally by September 17. 3

The electronic equipment that supports billions of transactions suffered severe damage and needed a massive repair effort. After just a week, the volume in the Treasury market was well below normal levels; that was the reason why the Securities and Exchange Commission (SEC) undertook regulatory actions - like the suspension of the rules that restrict when firms can buy back their own shares - to support the market. 4 The commercial banking system suffered a little but this did not halt the flow of credit across the United States. Banks borrowed more from the Federal Reserve to carry uncleared credit payments.

  ΙΙ - Economic Sectors   1) Airlines  

The American Airlines industry was already in trouble due to the recession, but the 9/11 attacks came to worsen the situation. Commercial flights from and to the U.S. were cancelled for security reasons. According to the Air Transport Association (ATA), the airlines lost approximately 1.4 billion USD in revenue during the four-day shutdown of the national aviation system just after the 9/11. 5 Since service resumed, they have continued to lose money because significant numbers of travelers are afraid, opting

instead to use other means of transportation or to just stay home. A year after the attack, significant numbers of airline employees remain laid-off or may yet be subject to layoffs. Despite the 15 billion USD assistance granted by the Congress and the Bush Administration, the airline industry still struggles. 6

    2) Insurance  

The insurance industry was profoundly affected by 9/11, because of both the

cost and the unanticipated nature of the event. The loss of life and property gave rise to the largest property/casualty claim in history, estimated at 40 billion USD. Shares of major reinsurers dropped by more than 10%. 7 As a result, only a few insurers are offering limited, restricted, and expensive coverage for terrorism. Since the government is responsible for the safety of the country against terrorism, many questions have been raised about a possible federal role in providing compensation to companies that are unfortunately affected by future terrorist attacks.

3) Agriculture and Food

Before the September 11 terrorist attacks, the farm economy was beginning to recover from several years of low prices and depressed exports. But in the days following the 9/11 attacks, the agriculture sector experienced some pre-economic difficulties due to the temporary break in commodities future trading and losses from delayed shipments of perishable goods by air and by truck along U.S. borders with Canada and Mexico. i Farm income is dependent upon the revenue of farm exports and upon the cost of inputs (e.g., fuel and fertilizer). Changing geopolitical situations that followed 9/11 brought a certain degree of uncertainty into any predictions about the behavior of world markets and their effects on the U.S. farm sector's long-term financial health.

4) Small Businesses

The 9/11 attacks troubled or destroyed close to 18,000 businesses (the vast majority being small businesses) in and around New York City's World Trade Center (WTC) complex. 6 In the weeks following the attacks, government actions (such as closing airports), and consumer reactions (such as decreased travel), caused a general economic chaos. Therefore, rather than being concentrated in one affected area; small businesses were spread throughout the country. Compared to large firms, small ones are particularly vulnerable to disaster shocks and losses. Small businesses have inadequate cash reserves, are less able to raise capital, and generally are surprised when disasters happen.

ΙV - Unemployment  

The events of 9/11 immediately affected the U.S. labor market. The series of layoffs posed severe financial problems to the people concerned and increase unemployment also meant less income for the Federal Government who faced important cash needs to implement its military actions in Afghanistan. With the unemployment rate already above the 3.9% reached during the 1990s economic expansion, the 9/11 attacks worsen the condition of the workers already annoyed by the recession that started in March 2001.

Employers reported that between September 15, 2001 and March 30, 2002 they called 462 extended mass layoffsthat were directly or indirectly attributable to the attacks.Almost 130,000 employees lost their jobs in these actions, with 9 out of 10 were fired within two months of the attacks.The airlines industry laid off 38% of them, and the lodging (hotel and motel) industry let 23% of its employees go. i

  V - Security  

The events of September 11 lead to an increase in national security and an increase in U.S. military spending. Graph 1 shows the increase in military expenditures since 2001.

  Graph 1: U.S. Military Expenditure

 According to Graph 1, military spending increased steadily right after the attacks on September 11 with a more accentuated slope at the beginning of the U.S. military action in Afghanistan in 2002. Between 2006 and 2008, military expenses rose from 540 billions USD to more than 700 billions due to the oil crisis and the massive involvement of the United States in Iraq.

    VI - New York City (NYC)  

The city of New York was severely affected by the 9/11 attacks. Nearly 3,000 people lost their lives, more lost their job, the number of small businesses drop roughly, 1.5 billion USD were required to cleanup and restore the World Trade Centers' site; and more than 20 billion USD were needed to repair damaged buildings and destroyed infrastructure.

The events of Sept. 11 have caused Americans to reassess their priorities and take steps to shore up their balance sheets," says Lynn Reaser, chief economist for Bank of America Capital Management. "Individuals seem less willing to take financial risks and are adopting a more conservative approach to spending and living

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