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US economy to take $639 billion hit from WTC

The US economy will take a staggering $639 billion hit through 2003 and lose as many as 2 million jobs as a direct result of the September 11 air attacks on downtown Manhattan's World Trade Center, according to a report, prepared for the New York State Senate and released on Monday.

The report, one of the first to look at the national economic impact of New York City's disaster, was prepared by the New York State Senate's economic consultants, DRI-WEFA, of Lexington, Massachusetts.

Much of the report focused heavily on the impact on New York State. The state Senate will use the study to strengthen the state's case for more federal aid. Gov George Pataki has asked Washington for $54 billion; President George W Bush so far has stood by his pledge to give the state $20 billion.

The national economy stands to lose a total of $639 billion, based on reductions in the Gross Domestic Product, which DRI-WEFA forecast at $40.8 billion for the fourth quarter of 2001, $316 billion for 2002, and $280 billion for 2003.

One of the main reasons the attacks -- which were expected to cost New York State more than $4.6 billion in lost tourism spending through 2003 -- struck the national economy so hard was because activity already had weakened substantially before two jets slammed into the World Trade Center on September 11.

"Across the United States, economic activity ground to a halt in the week of the attack, and as the dust settled, it was clear that consumers were in no mood for immediate spending," the report said.

New York State lost an estimated 100,000 jobs -- with New York City accounting for 70,000 of those positions -- though the report said it should regain 20,000 this year. About one-third of the positions New York City lost were in financial services -- its vital hometown industry, which also is the state's main economic engine.

"This report also makes clear that New York -- Ground Zero in this diabolical attack -- has suffered disproportionately and that the nation's recovery is inextricably tied to own," State Senate Majority Leader Joseph Bruno, a Brunswick Republican, said in a statement.

The amount of income New Yorkers get from capital gains fell 20 per cent in 2001, the report said, adding that bonuses paid to security industry professionals fell 42 per cent. During 2002, bonuses were expected to rise 3 per cent, but capital gains should stay flat.

About 32,000 World Trade Center jobs that were forced to relocate might never return to New York City, at least not before 2004, the report said.

New York State's Senate, which along with the Assembly has just started analysing the $88.6 billion budget Pataki presented, is dominated by upstate Republicans who typically are less inclined to aid New York City than the Democrat-led Assembly.

The report, commissioned by the Senate, found that the tourism sector, which had cooled before September 11, lost 46,500 jobs in tourism -- and that 19,700 jobs were upstate.

Pataki, in part, balanced his $88.6 billion budget with $3.1 billion of federal aid, though the Bush administration already has poured cold water on one of the governor's proposals.

That was a plan Pataki unveiled to increase how much the federal government pays for Medicaid, the federal-state program for impoverished people who need health care, by raising the match to 53 per cent from 50 per cent.

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