Before the U.S. military has fired its first $1 million missile at Osama bin Laden, the high price of America's new war is already starting to add up. Last week was the worst since the Great Depression for the Dow Jones industrial average, which lost almost 1,400 points, or 14%, in five frantic trading days, erasing nearly $1.4 trillion in investor wealth--at least 10 times the property damage caused by the terror attacks against the World Trade Center and the Pentagon. The nation's airlines announced that they are sending more than 80,000 workers to join the growing ranks of the pink-slipped, now up to 1.2 million for the year. And given that travelers are staying firmly planted at home, the nation's tourism business has suddenly ground to a near standstill.
Even aerospace giant Boeing, which has a sizable defense division that should pick up some of the slack from its commercial jet business, said it will lay off as many as 30,000, or 15% of its work force, by the end of 2002. For most observers, it's no longer a question of whether we are in a recession but how long it will last. Mark Zandi, chief economist at economy.com calls the terror attacks "a disaster of nationwide proportions."
What's going on here? A war is supposed to throw a life preserver to a floundering economy, not sink it. Well, as Americans are starting to realize, this is not your typical war. This time there won't be any massive arms buildup and full-scale mobilization of resources. We won't be launching Liberty ships or new fleets of bombers to fight terrorists armed with box cutters.
Indeed, with the home front threatened, consumer confidence waning and businesses hunkering down and putting expansion plans on hold, the U.S. is experiencing the worst aspects of a wartime economy with few of the benefits. Many observers think the 4.9% August unemployment rate, which had already risen a full percentage point over the previous 11 months, could now hit 5% to 6% early next year. Foreign investors, who lately have plowed $500 billion a year into the U.S. economy, no longer view the dollar as the safe haven it once was. And housing, one of the last sectors of the economy to show resiliency, seems to be dragging; housing starts fell nearly 7% in August, the government reported last week.
In the aftermath of the terrorist attack, consumers and business leaders alike are in mourning. "We're all walking around with heavy hearts, and when you add light wallets to heavy hearts, it's even more devastating," says Nicki Grossman, president of the Greater Fort Lauderdale Convention and Visitors Bureau. All across Florida, where more than half the visitors arrive by air, the once thriving tourism industry has been decimated. In the Orlando area alone, 253 groups representing 32,531 attendees have canceled visits set for September, and an additional 82 groups have nixed their plans for October. In Las Vegas, only half the city's 125,000 hotel rooms were occupied last week, down from 94% a year ago; Park Place Entertainment announced last week it was postponing the $475 million construction of a hotel tower at Caesars Palace. From New York City to Los Angeles, waiters, travel agents and Broadway actors are all losing work.