Introduction

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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):

15. 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

16. 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

17. 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

18. 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%

19. 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

20. Lessons from Past Disasters • How long does “recovery” take? • Are there permanent losses?

21. LARGEST SINGLE EVENT INSURANCE LOSSES (in millions)

22. LIEFELINE RESTORATION TIMEFRAMES IN THE KOBE EARTHQUAKE

23. MAJOR PORTS’ SHARES OF JAPAN’S IMPORT TRADE, JAN 1994 - APRIL 1997

24. CONTAINER TRAFFIC AT SELECTED ASIAN PORTS