Area Economy Weathers Storm Transportation Industry Still in Trouble; Housing Sales Remain Strong
Comerford, Mike, Daily Herald (Arlington Heights, IL)
Byline: Mike Comerford Daily Herald Business Writer
Sept. 11 was a day when explosions caused silences.
Silence in the air over Chicago and its two airports.
Silence on the floors of Chicago's powerful futures exchanges.
Silence in the hallways of Chicago's great skyscrapers after evacuation.
Chicago's clamoring economic core was quieted by crashing planes to the east and we paused, wondering, "What next?"
The immediate economic stall was evident but less clear was what the Chicago area economy would be like a year later.
"Chicago took a bigger hit because of its reliance on air travel," said Bill Testa, senior economist at the Federal Reserve Bank of Chicago. "But we're doing marginally better now, depending on the sector."
Some of the impact of that infamous day was immediate and direct.
O'Hare International Airport and Midway Airport were closed for three days. The Chicago Board of Trade and Chicago Mercantile Exchange were closed for two days. The Chicago Stock Exchange reopened in conjunction with Wall Street after a week.
Economy was struggling
Yet most of its impact is difficult to pinpoint because the economy was already in a recession and some industries, such as air travel and telecom, were already in deep downturns.
Sept. 11 aggravated negative economic trends, but the worst fears of some economists have not materialized.
"This has sealed the fate of the American consumer," warned Morgan Stanley economist Stephen Roach on Sept. 12.
Instead, assisted by interest rate cuts by the Federal Reserve, consumer spending held up and the economy expanded at a 2.7 percent rate in the final quarter of 2001, and at a 3 percent rate in the first half of 2002.
The rebound followed three quarters of contraction, the longest negative stretch since the 1990-91 recession, according to a survey by Blue Chip Economic Indicators.
"I don't think anyone knew exactly what to expect in the wake of 9/11," said Norman Wesley, chairman and chief executive of Fortune Brands Inc., the Lincolnshire-based maker of Moen faucets, Titleist golf balls and Jim Beam bourbon.
"We saw consumers bounce back pretty quickly and give the economy a much-needed lift."
Housing stays on track
The Chicago area housing market saw an immediate downturn for weeks after the attacks but is now back on a record pace, said Steven Hovany, president of Schaumburg-based Strategy Planning Associates Inc., a housing planning and economics firm.
Security firms experienced a boost. In the aviation sector, spending on security products - which had been rising about 13 percent a year before the attacks - is likely to surge 27 percent a year through 2005, according to The Freedonia Group, a Cleveland- based research firm.
Defense industry companies also have been buoyed by the conflict in Afghanistan, helping the defense side of Chicago-based Boeing Co.
Still, whether it was directly attributable to Sept. 11 or not, layoffs in the aviation industry have been staggering.
Although most of their layoffs were outside the Chicago area, the plunge in Boeing's commercial airline business led it to cut nearly 30,000 jobs after Sept. 11. Elk Grove Township-based UAL Corp., the parent of United Airlines, cut almost 20,000 workers after two of its planes went down in the attacks.
The airline industry estimates it will lose $6 billion this year.
United hit hard
Locally, United Airlines had been on track to lose about $1 billion in 2001 before Sept. 11. It lost $2.1 billion despite an $732 million cash infusion from the government and it has lost another $850 million in the first half this year.
The airline has said it may have to file for bankruptcy this fall if it doesn't get concessions from unions and a government guarantee for billions in new loans. …