Last week's attacks on New York and Washington are already having a devastating effect on the U.S. economy, and some analysts are warning that the worst is yet to come.
Banks, airlines, plane makers, insurance companies, entertainment companies, travel and leisure firms, online travel agencies… the list is dismally long of individual companies and entire industries that are already being affected by an abrupt drop in consumer and business spending — a decline that unexpectedly came in an already shaky economy.
What it all means, say economists, is that the U.S. economy is going to experience some extremely tough times in the months ahead, despite lower interest rates, tax rebates, talk of further tax cuts and now what financial markets are dubbing a "war premium" as efforts to find the culprits behind last week's unspeakable acts goes forward.
Even soothing words from Federal Reserve Chairman Alan Greenspan, testifying before Congress today that any short-term uncertainties will not undo long-term prosperity, did little to instill confidence on Wall Street.
"Consumers are like deer in the headlights. They're just paused and waiting to see what happens next," said Sherry Cooper, chief economist with Harris Bank / Bank of Montreal. Cooper downgraded her firm's forecast after last week's attacks to reflect what she expects will be a much longer time-frame for recovery.
Bad News Abounds
The evidence is almost too far flung to track.
In Manhattan, few are in a shopping mood, and visitors to the city have either left in a scramble or canceled their plans. Flagship department stores such as Barneys, Bloomingdale's and Saks Fifth Avenue are practically empty; the landmark Plaza Hotel is considering closing its famed Oak Room and Oyster Bar because of lack of business.
At the Loews Hotel in Miami Beach, occupancy was at 12 percent Tuesday down from 70 percent last Monday. Convention meetings scheduled for the next few weeks are being canceled.
And it's not just tourists too shell shocked to travel. Hundreds of meetings and conventions are being canceled across the nation, a trend analysts say may drain billions more dollars out of a travel industry already staggering before last week's terrorist attacks.
"The airlines are the vehicle, for the most part, for delivering guests and business travelers to our doors," said Jonathan M. Tisch, the chief executive of Loews Hotels. "If the people are not flying, they are not staying in our hotels. If they are not in hotels, then they are not eating in restaurants or shopping in retail."
Other industries, too, are reeling from the effects. The cruise line industry is suffering as travelers cancel their vacation plans or simply decide they don't want to fly to the destinations where the ships depart. Both Carnival Cruise Lines and Royal Caribbean have indicated bookings are down about 40 percent in the past week.
Greenspan, in his testimony, acknowledged too that the unprecedented shutdown of America's air travel and tightened border restrictions have led to dramatic shortages of parts and products. "Automakers, for example, are reported to have pared production and even closed some plants in the past week largely owing to supply shortages though doubtless short-term demand uncertainties have also played a part."
Lots of Layoffs, Warnings
Many companies wasted no time sharing their expected bad news with Wall Street, unveiling expectations of slowing sales and redundancy of workers.
Among them were:
Boeing: The Chicago-based airplane maker will lay off between 20,000 and 30,000 workers in its commercial jet unit by the end of 2002 as a result of dwindling orders.
American Airlines: The world's largest carrier announced Wednesday it was laying off "at least" 20,000 employees. The cuts will affect American, American Eagle and TWA.
American Express: The New York-based banking and credit card giant warned it will not meet Wall Street earnings expectations because of companies slashing their business travel, as well as the costs of rebuilding its headquarters in lower Manhattan.
Charles Schwab: The San Francisco-based online brokerage said earnings will fall more than expected, the first Wall Street firm to tally the damage to its bottom line from the terrorist attacks that have deepened stock market declines.
Viacom: The entertainment conglomerate warned Wednesday the terrorist attacks would have an impact on its business as advertisers balk and as newsgathering costs mount. Viacom owns the CBS network, numerous local television and radio stations and MTV, among other media properties.
Dow Jones Media / New York Times / Knight Ridder: All three media companies warned that their earnings will fall short on lower ad revenue and increased expense from covering the events of the past week.
Walt Disney: The Burbank, Calif.-based entertainment company said it expects to see a drop in revenue as fewer people frequent its theme parks and attend Broadway shows such as The Lion King. It also said it is temporarily freezing hiring and is cutting back hours for some of its workers in the wake of last week's attacks. Walt Disney is the parent company of ABCNEWS and its affiliates, including ABCNEWS.com.
Hilton Hotels: The Beverly Hills, Calif.-based hotel chain said Wednesday it is expecting a significant drop in revenues due to cancellations of hotel room bookings and events.
Extraordinary Times for Business
"We think for the next six to 12 weeks that we will see extraordinary times in our business, probably the worst we've ever seen in terms of business travel," Hilton Chief Executive Stephen Bollenbach said Wednesday in a morning conference call.
Analysts are now predicting that consumer spending — which accounts for more than two thirds of total U.S. economic output — will suffer even more as people choose to put off, postpone and stay in rather than go out and spend.
That aside, analysts note that eventually, at some point, both consumer spending and business output will slowly make its way back to normalcy. While an economic recovery is now all but ruled out for this year, they do point to a variety of different catalysts that could quickly and decisively turn the stock market — and the economy — around.
"Right now people are in shock with events they just saw," said Bruce Steinberg, chief economist with Merrill Lynch. "If we can get past that we may see consumer confidence come back, possibly by Christmas, but I unfortunately don't see any kind of extended recovery before then."