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Economic and Fiscal Impacts of the World Trade Center Attack Research-in-Progress Conference of the New York State Network for Economic Research Jason Bram and James Orr December 5, 2001. Introduction. Recent economic trends and immediate impact (Jason)

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Economic and Fiscal Impacts of the World Trade Center AttackResearch-in-Progress Conference of the New York State Network for Economic ResearchJason Bram and James OrrDecember 5, 2001

introduction
Introduction

Recent economic trends and immediate impact (Jason)

Local economy contracting well before the attack

Short-term impact on employment may have run its course

Industries most affected: finance, travel/tourism, retail

Review economic impact studies (Jim)

Cost estimates combine capital losses + economic disruptions

Broad consensus on short-run cost estimates

Wide variation in estimates of long-run impacts

slide3

Weekly Jobless Claims

New York State

New Jersey

Ths.

Ths.

1/1/00 7/1/00 1/1/01 7/1/01

1/1/00 7/1/00 1/1/00 7/1/01

  • Weekly claims in November back down to pre-attack levels
  • Roughly 75,000 incremental claims filed since the attack in NY
  • Roughly 20,000 incremental claims filed since the attack in NJ

Source: Bureau of Labor Statistics

private sector employment new york city and new jersey
Private Sector EmploymentNew York City and New Jersey

Thousand

Thousand

New York City

New Jersey

  • NYC lost 70,000 jobs in October; NJ gained 15,000

Source: Bureau of Labor Statistics

private sector employment new york state vs sum of metro areas
Private Sector EmploymentNew York State vs. Sum of Metro Areas

Thousand

Thousand

Sum of Metro Areas

(Right-Hand Scale)

NYS Total

(Left-Hand Scale)

  • September “employment gap” caused by temporary distortions

Source: Bureau of Labor Statistics

as goes the financial sector so goes nyc
As Goes the Financial Sector, So Goes NYC

Thousands

Thousands

Wall Street Employment

(Right Scale)

NYC Employment (Ex-Wall Street)

(Left Scale)

Oct-01

  • Wall Street employment has fallen 13% since peaking in March

Note: Shading denotes period between peak and trough of

NYC Coincident Index

Source: Bureau of Labor Statistics

nyc hotel occupancy and room rates
NYC Hotel Occupancy and Room Rates

Percent

Y/Y Percent Chg.

Nightly Room Rates

(Right Scale)

Occupancy Rate (SA)

(Left Scale)

  • Occupancy and room rates falling before the attack
  • Occupancy rates rebounded partially in October
  • Room rates remain steeply discounted

Source: PKF Consulting

slide8

New York State’s economy peaked in March

NYS Index of Coincident Indicators, July 1992 = 100

Mar-01

Oct-01

Note: Shading denotes period between peak and trough of

NYS Coincident Index

Source: FRBNY

slide9

New York City’s Economy Peaked in April

NYC Index of Coincident Indicators, July 1992 = 100

Apr-01

Oct-01

Note: Shading denotes period between peak and trough of

NYC Coincident Index

Source: FRBNY

slide10

New Jersey’s Economy Peaked in January

NJ Index of Coincident Indicators, July 1992 = 100

Jan-01

Oct-01

Note: Shading denotes period between peak and trough of

NJ Coincident Index

Source: FRBNY

overview of impact studies
Overview of Impact Studies

Author Date Emphasis

Fiscal Policy 9/28/01 Short-term job and output losses

Institute Headline: 108,000 jobs lost

NYC Comptroller 10/4/01 Capital losses, clean up, short- and

medium-term job and output losses

Headline: $105b cost

NYS DOB 10/9/01 Capital losses, clean up, tax revenue

Headline: $54b aid request

NYC Partnership 11/15/01 Capital losses, clean up, sectoral

impacts, reconstruction agenda

Headline: $83b cost, $16b

uninsured loss

Independent 11/16/01 City tax impact

Budget Office Headline: $1b revenue

shortfall

assessing the economic fallout
Assessing the Economic Fallout
  • Capital Costs
    • Property destruction and damage
    • Clean up and restoration of site
    • Loss of human life
  • Employment and Output Losses (in both WTC zone and affected sectors citywide
    • Temporary disruptions to output (up to a year)
    • Longer-term disruptions to output (beyond one year)
  • State and City Tax Revenue Shortfalls
  • Offsets: Federal Aid and Private Insurance
estimates of wtc attack capital costs
Estimates of WTC Attack Capital Costs

Author Total Clean Up/ Replacement/ Human

Restoration Repair Capital

($billions)

NYC Comptroller $58 $14 $33 $11

NYC Partnership 44 14 20 10

NYS DOB 28 12 16 -

  • Replacement/repair differences due to updated information and definition
  • Human life loss estimates to decline with revised death figures
  • FEMA expected to cover much of the clean up/restoration costs
  • Private insurance to cover some of the replacement/ repair bill
slide14

Job Losses Due to the WTC Attack

Fiscal Policy Institute (9/28): 108,000 jobs lost (direct and

indirect) in first month after attack.

NYC Comptroller (10/4): 115,000 jobs lost through June

2002 (NYC FY02)

NYS DOB (10/9): 100,000 jobs lost or displaced

NYC Partnership (11/15): 125,000 jobs lost by end of Q4 2001

Independent Budget Not Specified

Office (11/16):

slide15

Output Losses Due to the WTC Attack

($billions):

NYC Comptroller (10/4): $24-39

$21 through 6/02

$3-18 from 6/02 to 6/03

NYC Partnership (11/15): $39

$19 through 6/02

$20 from 6/02 to 6/03

Longer-term loss estimates vary with estimates of city reconstruction

slide16

Sectoral Impacts in New York City

Finance:

Direct short-term job losses:

Fiscal Policy Institute 20,000

NYC Comptroller 30,000

NYS DOB 30,000

NYC Partnership 19,000

Longer-term issues:

Return and retention of firms

Reduce vulnerabilities of financial system

Upgrade infrastructure

slide17

Sectoral Impacts in New York City

Travel/Tourism:

Direct short-term job losses:

Fiscal Policy Institute 30,000

NYC Comptroller 18,000

NYC Partnership 21,000

slide18

Sectoral Impacts in New York City

Retail:

Direct short-term job losses:

Fiscal Policy Institute 12,200

NYC Comptroller 17,500

NYS DOB 20,000

Direct short-term sales revenue loss (Q4):

NYC Partnership 10-15%

slide19

Estimated Tax Revenue Shortfall Due to WTC Attack

NYC Comptroller - NYC: 1.3 Total

0.7 FY02

0.6 FY03

IBO - NYC: 2.7 Total

0.9 FY02

1.8 FY03

NYS DOB - NYS: 9.0 Total

3.0 FY02

6.0 FY03

slide20

Lessons from Past Disasters

  • How long does “recovery” take?
  • Are there permanent losses?