scheduled a group trip to London for the opening of August Wilson’s Jitney, co-starring Linda Powell, daughter of Secretary of State Colin Powell. After the terrorist strikes, the younger Powell had to pull out of the production because her family wanted her to be close. “The trip was scheduled for an October 16 departure, but none of the guests who had planned to go were willing to go, so it was canceled,” adds Hall.
Despite the heavy losses in some businesses, there are others that stand to gain. Defense contractors and security and biometrics firms, for example, are poised to make more than a few dollars in contracts from the Dept. of Defense, the federal government’s largest purchaser of technical goods and services. Biometrics companies stand to gain from the federal government’s push for security technology. Some public arenas and airports already employ or plan to employ face-recognition technology as part of their security procedures.
As the terrorist attacks led to a greater need for security, it also meant fewer consumer dollars spent. Consumer spending–once considered by many economists as the one economic factor keeping the United States out of a recession–dropped significantly. The consumer confidence index plummeted to 85.5 in October from 97.0 in September, a much worse decline than expected. The index is an economic indicator designed to gauge consumers’ feelings about the state of the economy.
Erin Rhines left her previous job last February, at a healthcare company, because there was talk of layoffs. She was right: Her department was eliminated in July. Now, the 26-year-old writer-designer at EarthShell Corp. has ceased regular shopping sprees. She also took a loss in the stock market, so she cashed in her stocks in fear that more terrorist attacks would cause the market to tank. “I feel like I need to put more money into savings than spending right now, because I just don’t know what’s going to happen.”
Consumers are spending less because of fear of rising unemployment, so goods stay on the shelves, which means that retailers do not order replacement goods. This, in turn, means manufacturers produce less, and are forced to lay off workers, leading to rising unemployment–the very thing consumers are concerned about. Add to this, consumers and workers worrying about a weak stock market eating away at 401(k) portfolios and the fear of future terrorist attacks and you have what economist John Albertine refers to as a “vicious cycle.” Albertine is chairman and CEO of Albertine Enterprises Inc., an economics consulting and merchant-banking firm in Washington, D.C.
Despite the dismal numbers for October, the consumer is far from down and out and continues to demonstrate impressive resilience. Many bargain hunters are finding great deals as businesses slash prices and offer incentives to boost sales. In the two weeks following the attacks, a flight from New York to Los Angeles could cost $100. Fares for international flights were also slashed. Hertz lowered rental rates on compact cars to just $20 per day. Auto dealers have had perhaps the