Tuesday, September 22, 2009


IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations
-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor
---------------------- Stuart Basefsky
New York, NY 10016
-------------------------------Director, IWS News Bureau

Homeland Security
Office of Immigration Statistics
Working Paper

The Macroeconomic Impacts of the 9/11 Attack: Evidence from Real-Time Forecasting [August 2009]
[full-text, 16 pages]


Estimates of the consequences of human-made and natural disasters are crucial for informing decision making by both public and private actors. The 9/11 attack stands out as a particularly important event whose consequences need to be well understood. This study evaluates the macroeconomic impacts of the 9/11 attack on U.S. real GDP growth and the unemployment rate by examining how forecasts of these variables were revised after the attack occurred. By this approach, the immediate impact of the 9/11 attack was to reduce real GDP growth in 2001 by 0.5%, and to increase the unemployment rate by 0.11% (reduce employment by 598,000 jobs.) Results are robust to controlling for how economic forecasts typically change over the course of the forecasting horizon in normal and recession years. Impacts on 2002 outcomes are more difficult to identify. Forecasted real GDP growth in 2002 fell dramatically immediately after the 9/11 attack but then recovered fully. The recovery in the forecast could have been due to unforeseen responses that mitigated the impact of the attack, but it also could have been due to erroneous forecasting and a poor understanding of how the attack would impact the economy. The forecasted unemployment rate in 2002 rose sharply immediately after the 9/11 attack, but unlike real GDP growth, it never subsequently returned to a pre-9/11 level. Forecasters seemed to have anticipated the 2002 "jobless recovery" early in that year.

This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  

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