The economy before and after 9/11

You can't blame all the economic hurdles we've faced over the past decade on the attacks, but there are many connections. Here's where we stood then and now on the deficit, jobs and more.

By RPrichard Sep 7, 2011 2:47PM

By John Miley, Kiplinger's Personal Finance


Much has transpired on the economic front since terrorists attacked the U.S. on Sept. 11, 2001. The nation weathered two recessions; homeowners suffered record foreclosures; workers faced double-digit unemployment; and investors trudged through a lost decade -- stock markets aren’t much better off today than they were ten years ago.

Kiplinger.comNot all of the problems that have plagued the U.S. economy can be tied to 9/11, though there are arguments to be made that some can. Judge for yourself. Here’s a look at where the economy was a decade ago, on the eve of the terrorist attacks; where it is today; and what happened in between.


The deficit

Then: $128 billion budget surplus in 2001. After 28 years of deficits, the federal government finally managed to produce a surplus for four straight years starting in 1998, including $236 billion in 2000 and $128 billion in 2001. Long-term prospects were rosy. “The outlook for the federal budget over the next decade continues to be bright,” the Congressional Budget Office said in January 2001, forecasting an $889 billion surplus in 2011. Of course, the CBO’s projection at the time assumed that revenue and spending policies would be maintained.

Now: Projected $1.3 trillion budget deficit in 2011. Sweeping tax cuts passed in June 2001 came at a time when the economy was already in recession on the heels of the dot-com bust. Then came 9/11. Subsequent wars in Iraq and Afghanistan have a price tag in excess of $1 trillion and counting. While the deficit actually shrank between 2004 and 2007, the Great Recession necessitated costly government intervention, including the Troubled Asset Relief Program of 2008 ($700 billion) and the economic stimulus package of 2009 ($800 billion). The federal deficit was $1.3 trillion in 2010. CBO projections put the deficit again at $1.3 trillion for 2011.


The stock market

Then: The Dow closed at 9605.51 on Sept. 10, 2001. The Dow Jones Industrial Average ($INDU) climbed mightily in the 1990s, more than quadrupling in value during the decade as individual investors poured into the stock market. The 10,000 barrier was breached in 1999, and the sky seemed the limit. But the events of 9/11 dampened an already weakening economy. When trading resumed after the terrorist attacks, on Sept. 17, the Dow sank 684 points, or 7.1%. Lingering effects of a recession that officially ended in November 2001 kept the Dow from finding firm footing above 10,000 for another two years.

Now: The Dow closed at 11,493.57 on Sept. 1, 2011. The Dow topped 14,000 by October 2007, an all-time high. But the 18-month Great Recession, which began officially in December 2007, took a toll on the average -- especially its financial components. Shares of American Express (AXP) fell 63% during 2008; Bank of America (BAC) dropped 60%. In September 2008, Kraft Foods (KFT) replaced American International Group (AIG) in the Dow. In June 2009, Citigroup (C) was bumped in favor of Cisco Systems (CSCO). The Dow has climbed 76% since its bear-market low of 6547 on March 9, 2009. Trading ahead of the tenth anniversary of 9/11 has been extremely volatile.


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Then: 4.9% (August 2001).
The unemployment rate was 4.2% at the start of 2001, but the unfolding recession lifted joblessness to 5.7% by year’s end. The economic drag of 9/11 contributed to the labor pains. An estimated 600,000 jobs were lost as a direct consequence of the terrorist attacks. Of those lost jobs, 226,000 were in travel and tourism. At the World Trade Center, 1,100 businesses were disrupted. It took four years before the unemployment rate returned to its pre-9/11 level.

Now: 9.1% (August 2011). After stabilizing at a healthy 5% or below in the mid 2000s, unemployment began to accelerate in 2008 as the Great Recession went into full swing. The U.S. ended up losing 2.6 million jobs that year. The jobless rate peaked in October 2009 at 10.1%, a level not seen since 1983. Today, about 14 million Americans are out of work, and there are few signs of rapid improvement on the labor front. Long-term unemployment remains a stubborn problem, with 6.0 million workers unemployed for at least 27 weeks.



Then: $156,600 (median home price in 2001). The median price of an existing home in the U.S. in 2001 was $156,600. The homeownership rate at the start of that year was 67.5%. The Federal Reserve had a tight monetary policy in place going into 2001, with the target on the federal funds rate at 6.5%. (The fed funds rate, the interest that banks charge each other for short-term loans, influences rates on other loans, such as mortgages.) As the recession unfolded, the Fed began to lower rates to stimulate economic growth. Four rate cuts were made in rapid succession after 9/11. The fed funds rate ended 2001 at 1.75%. By 2003 it was at a 50-year low of 1%.

Now: $173,100 (median home price in 2010). A good case can be made that the Fed’s super-low rate targets, which were prompted by the 2001 recession and exacerbated by the 9/11 attacks, played a key role in the housing bubble. From 2000 to 2005, housing prices rose at an 8.26% annualized rate, vs. 4.22% annualized during the 1990s. The median home price peaked at $221,900 in 2006. Then the bubble burst. The median price fell 2% in 2007, 10% in 2008 and 13% in 2009. It ticked up 0.6% in 2010, but at $173,100 it was well below peak prices. Homeownership, which hit a high point of 69.2% at the end of 2004, has since retreated to 65.9%, the lowest level in 13 years.

Air travel


Then: U.S. airlines flew 34.9 million passengers. In August 2001, U.S. airlines carried 63.8 million passengers and employed more than 520,000 workers, but the 9/11 terrorist attacks had an immediate and profound effect on the industry. The number of passengers was nearly halved in September 2001, to 34.9 million. The federal government quickly intervened. The Air Transportation Safety and System Stabilization Act, signed into law Sept. 22, 2001, gave airlines $5 billion in immediate assistance and $10 billion in loan guarantees to prop up the industry.

Now: U.S. airlines flew 63.8 million passengers. U.S. airlines flew 63.8 million passengers in May 2011 (the latest data available), the same number that took flight in August 2001. But flying isn’t the same as it was ten years ago. Among the travel-related legacies of the terrorist attacks are tighter carry-on restrictions and longer security lines at airports. Creation of the Transportation Security Administration, now part of the Department of Homeland Security, itself a direct result of 9/11, was approved on Nov. 19, 2001. The TSA currently has 50,000 employees and a budget of $8 billion. Due in large part to consolidation, the number of workers in the U.S. employed by airlines has fallen 26% since 9/11 to 383,000.



Then: $271.50 an ounce (Sept. 10, 2001). It’s no secret that some investors scurry to gold in times of uncertainty. Gold is considered a hedge against inflation and a weakening dollar, among other things. The week after 9/11 was no exception. Gold prices jumped a quick 8% on the heels of the terrorist attacks. The precious metal continued to rise steadily after 9/11, doubling in value by the end of 2005.

Now: $1821.00 an ounce (Sept. 1, 2011). Gold shot into the $600s per ounce in 2006, a range where it bounced around until the second half of 2007. That’s when signs of trouble at financial institutions, especially mortgage lenders, began to emerge. Gold first breached $1,000 in March 2008, but it wasn’t until the fall of 2009 that prices stayed in the quadruple digits. Gold has exploded recently amid recession fears and stock-market volatility, surging past $1,800 an ounce. Since 9/11, the price of gold has gone up more than 600%. In contrast, the U.S. dollar has lost about one-third of its value since 9/11.

Oil and gas


Then: $1.53 per gallon gasoline/$27.66 per barrel oil (Sept. 10, 2001). Oil is a commodity with a volatile history. Prices are often driven by global demand, the stability of producing nations and the whims of speculators. In the days after 9/11, the price of West Texas Intermediate crude rose 7% to $29.59 a barrel. However, oil quickly retreated as fears of economic slowdown trumped worries about scarce supply from the Middle East. Oil prices were little changed on the first anniversary of the terrorist attacks. As for gasoline, the national average weekly price for a gallon was $1.51 as of Sept. 10, 2001.

Now: $3.65 per gallon gasoline/$88.93 per barrel oil (Sept. 1, 2011). Oil began to climb appreciably in 2004, and by 2008 it had been bid up to nearly $150 per barrel, largely due to concerns that global demand could outpace supply. Gasoline topped $4 per gallon in the summer of 2008. More recently, oil has fallen to $88.93 a barrel on a weaker outlook for worldwide demand. Gasoline is now at $3.55 per gallon, about $2 more than it went for on 9/11. Still, oil and gasoline are diminishing resources. According to the International Energy Agency, oil’s share of total global energy will shrink from 33% in 2008 to 28% in 2035.

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Sep 9, 2011 11:57AM

the question was did 9/11 ruin the american economy?  How about american greed ruining the economy of the United States!  Keep giving people who won't be able to afford homes in the longrun small, beautiful, Adjustable Rate Mortgages and than when they mature in 4-5 years double or triple their mortgage payment.  Only one winner there, the BANKS and the LENDING COMPANIES.  People lose there homes and than lose their jobs because their employers can't afford to keep them on.  A typical domino affect.  This country will never be the same once this depression is over, and yes we are in a severe depression no matter what the geniuses say from Washington D.C.  But here is an idea.  Lets give all these sports heros

 millions of dollars to play our favorite games.  There is money out there to be had.  It's just in the wrong hands and will always be!

Sep 9, 2011 2:59PM

The only thing that's hurting the economy is greed. Just look at gas prices. $85 a barrel of oil $3.50-4.00 a gallon for gas. Last time prices were this high oil was over $150.00 a barrel. The only thing keeping everything slow is the price of gas. I cant think of one other commodity that controls every aspect of our life style then the prices of gas.


This is what's hurting our economy if you cant afford to buy gas to drive to work how do they expect you to buy anything else!

Sep 9, 2011 1:17PM
Certainly 9/11 did nothing to help this country but if I had to attribute our present economic difficulties to one single cause I would respond with a single word:  NAFTA.
Sep 9, 2011 3:23PM

CAFTA killed the economy. It was supposed to be a fair trade agreement. It was not supposed to be that all of our corporations move their production lines and the technology that goes with over there, and then export our products back to us from China. If you look at the growth of China over the last ten years, and then take a look at the decline of the U.S. economy you can see the results are a mirror image of themselves in opposite directions.

There is no other way to describe this, but as officially sanctioned treason. 

Sep 9, 2011 2:23PM
Nope. Greed and Speculation is what ruined our economy.
Sep 9, 2011 5:38PM
I normally don't post- just read comments.  Many of the comments have parts of the real problem.  Outsourcing jobs- yes -- creating a consumer spending economy where we don't create anything (service industry; or worse, lawyers and financial analysts)- yes -- Creating one financial bubble to replace the previous one vs. letting the market naturally correct itself- yes -- hiding the real rate of inflation (which began nearly 30 years ago); a few years fudging numbers by a few percent is bad enough, but it you do it over 30 years then that becomes a huge number (just look at the charts at -- allowing speculators to increase price of oil (which is the one thing that will trickle-down into everything we do and buy -yes -- spending trillions that we don't have on both wars and wasteful domestic programs- yes -- both Republicans and Democrats fault- yes --
Sep 9, 2011 4:04PM
Started way before 9-11. 30 years or so ago when the powers that be decided to start to let all the manufacturing jobs go elsewhere and that was the beginning of what now is a "global economy" instead of a stand alone economy. Can remember my mom having GE stock and it doubling and splitting every few years. Wow are those days over along with manufacturing as it used to be. Now Greece has a bad day and we get hammered. Unless something drastic is done with trade or tariffs or something I don't like our chances at all at this point. All the manufacturing jobs are gone and everyones sitting around wondering why the tax base is declining. Maybe if Congress misses a paycheck or 2 they'll wake up and do something positive. We can only hope.
Sep 9, 2011 4:03PM
We the people do not have any control or say in government.  Money talks, and big labor and big business control our politicians.  They are all bought and paid for.  Labor unions and Wall Street is behind the Dems and the corporations are behind the Republicans.  Big money runs the ads and makes us believe what they want us to believe.  We are not represented by anyone in DC.  They have voted themselves big pay raises and perks that no one else has.  Congressmen and women have dozens of staff that do all the work.  Our system is broken and until we clean house and reform the system, we will continue down the road to bankruptcy as a nation.  We have been morraly bankrupt for some time and financially we are failing. 
Sep 9, 2011 3:18PM

9/11 attacks did hurt the economy, so did a decade of Middle East Wars. Then was the Bush tax breaks for the wealthy. Instead of investing here, they invested overseas, several million outsourced jobs. There where bailouts for Wall Street and a phony Obama stimulus bill. Don't forget the disasters that the world and the U.S. has had to deal with. But the biggest drain on our economy has been a decade of POOR LEADERSHIP.

Sep 9, 2011 3:21PM

Oh yes you are correct "diver00037" fuel prices have brought this struggling  economy to it's knees, since 9/11 fuel prices have NOT been stable

Sep 9, 2011 5:13PM
Our government has allowed our jobs to be shipped to China and India and their products that we used to make are being sold back to us as imports.  Both political parties have not been interested in closing the Mexican border where 15 to 30 million jobs in this country have been taken by people here illegally.  Obama wants the hispanic vote so he is catering to the Mexican population, and the Republicans want the cheap labor so the border is wide open.  Meanwhile, Americans suffer because of no jobs.  It is so strange to me that with black unemployment numbers higher than the national average with some age groups as high as 20% that support for Obama is still high among blacks.  We Americans need to take our country back from the crooks that are in DC.
Sep 9, 2011 4:38PM

This article reminds me of one of those fishing expeditions that you just know in your gut is going to end with you eating hot dogs for dinner. Personally, I’m much more fearful of the financial terrorists that continue to operate in our markets than the terrorists who were responsible for 911.

Sep 9, 2011 8:36PM
Everyone arguing again, because you don't like someone else's opinion.

Look at the reality of all of it.  It wasn't one single thing that got us in this economic crisis today.  It wasn't one President, or one act of terrorism, or a few different economic bubbles bursting.  It was the whole slurry of it.

The deflated inflation numbers, the cost of war, act of terrorism, many Presidents, past and present, bailing out banks and auto companies, trying to stimulate the economy.  We, the people, are also to blame, for our own lack of vision, lack of spending, lack of true understanding of the economy.  
Big corporations sending jobs to foreign countries for cheap labor.  Cheap labor doesn't mean we will spend less, but it means we might get a lesser quality product, yet we still buy.  
Big corporations with huge tax breaks getting tax refunds in the triple digit millions, yes really!!!

Sure we export goods, but we import more goods.  Why???  We need to change this!!!
Sep 9, 2011 1:55PM
Not mentioned in the story, nor attributable specifically to 9/11, are the millions of formerly good-paying American jobs that have been off-shored.  Today more than 5000 American factories operate in China, where they enjoy a captive workforce, virtually no labor or worker safety laws, and where pollution on a grand scale is considered part of the cost of doing business.  Many millions of other American jobs have been off-shored to other less-fortunate parts of our world too, under the guise of "free trade", where any employer is free to leave his American workforce and our attempt at cleaning-up our own environment behind in search of the greatest possible profit.  And, every attempt to reign-in the freedom to stiff America and its workers has been summarily quashed by the Republican Party, who are obvious beneficiaries of free trade policy. 

One easy way to create a whole bunch of American jobs would be to severely restrict free trade, which has had little positive benefit for the vast majority of Americans.  Sure retail prices are lower, but at what cost?  Pushing tens of millions of Americans into poverty while grossly polluting our planet is not progress, it should instead be considered criminal.  How about if a company wants to sell its products here in the US, then it has to adhere to our own worker safety and environmental laws at a minimum, regardless of where their plant is?  Such a law would be much fairer to our own workers, who have been cast aside like rubbish all too often in our post-9/11 world. 

Sep 9, 2011 2:48PM
Face the real truth - incompetence in the White House.  Bush is gone and things have gotten much worse.  It amazes me we don't have requirements for a president, e.g. military background (they are the Commander in Chief), some business background, etc.  Doctors, dentists, optometrists - they can't practice without licenses that require proper background education - yet the president just has to be 35 years old.  This is what you get - con man executives.  Talk is cheap.
Sep 9, 2011 4:22PM

The interesting part of the article is the surplus in 2001 and the note about the tech bubble just bursting.  Then the comments about market growth, then the bank bubble.  Then the growth in housing values, then the bubble bursting.  All of these examples show that market manipulation, investment frenzy (through uneducated investors wishing to hop on the money train),  and the misuse of power (career politicians noticing a way to manipulate how businesses run to get their agendas rolling and their voters in line while creating larger government and more programs) all shook the US economy to it's foundation and cost us money, equity, jobs, and prospects.


Now we are seeing the results as high unemployment, lack of value in currency, unfunded liabilities within the government, political hackery everywhere, the uprising of organized labor, an unstable market with wild up/down swings (killing average investors).  The only/best way to stabolize the markets and start solving the problem is by the state and federal governments capping their spending and reforming all programs such that we stay below GDP(federally) and without pushing all business out of the states.  Time is running out.  Without real, substantial reform we will end up in selective defaulting. 

Sep 9, 2011 4:38PM

Jobs will not return until we fix our economy. Our economy has fallen as the result of the failings of many administrations, both Republican and Demoncrat.

So how do we restore our Economy? In short, fix the root problems: astronomical rise in health care cost; continued dependence on foreign oil; and outdated, unfair, and confusing tax policies.

Health care requires increasing supply of health care while reducing demand for health care. Provide tax incentives and free use of excess government land to incourage investors to build new health infrastruture to educate a new generation of doctors, nurses, health technicians, administrators, etc. Would require no upfront money from the government, would stimulate jobs through creating immediate construction of facilities, encourage Education programs that lead to the medical fields, and best of all, reduce health care cost over time. The last is most important as Health care cost has been the greatest contributor to our budget over the last 20 years, affecting Medicare, Medicaid, Defense personnel costs, and VA medical expenses.

Foreign oil dependency can be fixed with complementary Energy Plan that encourges short term fixes (new nuclear facilities, increased U.S. drilling, and expansion of Natural Gas) while developing long term fixes (wind, solar, bio, etc.)

Lastly but most important, a flax tax combining National Sales tax which would discourage consumerism, a flax income tax that is escallating but has not deductions, credits, or write-offs, a low (10%) on all stock gains each year directly from the corporation, and a 25% tax on all monies transferred overseas.

All sides win. Republicans claim victory as the actions are based on simple capitalist policies (supply and demand, no financial stimulus, new tax base). Democrats claim victory through focus on health care and spreading tax responsibility to all through fair and open tax policies.

You and I win because it should restore our hope in our elected leaders, system of government, and most importantly our country!

Sep 11, 2011 6:30AM
I think too much credit is given to the terrorists. They may gloat over it thinking they got us. The truth is we got ourselves. Greedy corporations with offshore jobs, Wall Street corruption, Banks that made huge profits writing loans they knew would not be repaid. The people who were duped into buying the houses by low credit standards, or those who  speculated.  Politicians who put getting re- elected ahead of the people they are supposed to represent, the masses, not the wealthy. Finally us, people who fell for the crap spewed by the media and are being played off against one another to distract us from all of the above. Finally for whatever reason high oil prices.
Sep 9, 2011 1:56PM
How about american greed ruining the economy of the United States!  Keep giving people who won't be able to afford homes in the longrun small, beautiful, Adjustable Rate Mortgages and than when they mature in 4-5 years double or triple their mortgage payment.  Only one winner there, the BANKS and the LENDING COMPANIES.
You can't blame the banks for the greed of the middle class.
Sep 9, 2011 4:28PM

The price of fuel started the economic downturn. There is no such thing as extra cash anymore.

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