Three major indicators of economic conditions are 1) the gross domestic product (GDP), 2) the unemployment rate, and 3) the price indexes. Unemployment jumped a half-point to 5.4 percent in October and will reach to 6 percent in coming months. Even the most common job openings like McDonald’s took down the signs “Now Hiring.” Airlines took the hardest fall. Indianapolis alone had 300 layoffs. September alone carried over 150,000 layoffs for this country. Fortunately, layoffs have slowed to a trickle, but Bruce Steinberg, chief economist at Merrill Lynch in New York, say profits are likely to plumb post-World War Two lows in the fourth quarter, and the job cuts are far from over.

That being said, there’s no question were being hurt by the terrorist attacks. Production is centered on the ability to anticipate consumer demand. When a shock like

A favorable predictor for stocks is lower interest rates. The aggressive action by the Federal Reserve to lower rates is very positive for stocks. The terrorist attacks have increased the “risk premium,” or extra return, that stockholders demand above the return on safe government bonds. An increase in the risk premium occurs either by increasing expected future stock returns by depressing today’s stock prices, or by lowering yields on government bonds—or some combination. By lowering short-term rates, the Fed provides for a higher risk premium without forcing all the adjustment onto stock prices. In sum, the week after the attack, one harrowing week of stock trading took us back three years, to the Asian-crisis days of 1998. By loyalty and Patriotism will lead us into the future.

It sure would be nice to think that the worst of the market decline is behind us. And it just as might be. But, in the meantime, an awful lot of damage has been done. Intel, for instance, was up about 12% on the day. But its shares remain more than 4 points off its pre-attack levels.

Americans came together helping financially, emotionally, and spiritually. The Federal Government did their part by injecting many billions of dollars of liquidity into the banking system. Congress did its part by approving a $40 billion funding package for rebuilding. Many investors held claims to not sell stock. Federal and State disaster assistance top out at $657 million dollars. Many companies announced new or expanded stock-buyback plans and began acting on them. To the countries dismay, the slide still continued.

The fact that our economy was headed into a recession before the attacks is a contributing factor in the effects of the attack. Maybe we would not have made it officially into a recession? Maybe the attacks will kee

Some topics in this essay:
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