If the economy wasn't already in recession before Tuesday's terrorist attacks in New York City, the destruction and loss of life in the nation's financial capital might be enough to push it over the edge.
"The key is how the United States responds to it," said Jeff Thredgold, president of Thredgold Economic Associates in Salt Lake City and economic consultant to Zions Bank.
He believes that if the perpetrators are quickly identified and action taken against them, it will be much better for the economy, because confidence will be restored among investors in particular and consumers in general.
"If we can determine who did this and take very powerful steps against them in terms of retribution and retaliation, and if those steps are successful, we can go back to where we were," Thredgold said. "If not, then a recession is a real possibility."
Thredgold termed the attacks an "act of war" and said "we have to figure out who we are fighting."
As the biggest attack on U.S. soil in history, Thredgold said he believes Tuesday's tragedy has the potential to devastate consumer confidence and have an enormous impact on the airline and travel industries.
"Travel is going to become horrendously difficult as security at airports becomes more strict," he said. "There will be longer lines, checking baggage will be more of a hassle. . . . I suspect people are going to be willing to vacation where they can drive rather than fly."
Thredgold speaks from the perspective of someone who logs tens of thousands of air miles per year, traveling around the country to speak at economic seminars. He's not looking forward to the coming security upgrades at the nation's airports but says they are now inevitable.
Even before the attacks on the World Trade Center and the Pentagon, the economy was in bad shape, showing the toll of a yearlong slump. The economy barely grew in the second quarter, expanding at an annual rate of just 0.2 percent, its weakest performance in eight years.
And last week's news that the country's unemployment rate shot up to 4.9 percent in August, as job losses in manufacturing climbed above 1 million, rekindled recession fears and made some economists worry that the current quarter could turn out to be a lot weaker than many had thought.
"Given that they hit the nerve center of a lot of markets and businesses, . . . I'd be surprised to see any real economic recovery before March of next year," said Clifford Waldman of Waldman Associates.
Worries over whether consumers, whose spending accounts for two-thirds of all economic activity, will hang tough or collapse could be exacerbated depending on how financial markets react when they are opened, economists said.
The major stock exchanges were shut down Tuesday and officials said that the New York Stock Exchange, the NASDAQ and the American Stock Exchange would remain closed Wednesday. Those exchanges were expected to decide later in the day when trading would resume. Securities and Exchange Commission chairman Harvey Pitt told CBS's "The Early Show" Wednesday would be a day of assessment but that he believed the markets would be ready to open Thursday, according to SEC spokesman John Heine.
Locally, Thredgold said he believes the economic impact on Utah will be less than that on the nation as a whole, but he says the Olympics could be the ultimate loser.
"If the terrorists' goal is to go after American landmarks, the Olympic Games is our best-known trademark," Thredgold said. "Security will be heightened for the Games, and the airport will be a nightmare to get in and out of. The threat will be very real."
The key, he believes, is to send a strong message to those who supported and launched the terrorists on their mission of destruction.
"We have to let them know we won't tolerate this kind of thing. If we don't, the levels of anxiety will go up, and that will have a negative impact on the economy."
During a visit to Salt Lake City on Tuesday, British Consul General Paul Dimond expressed revulsion over what he called "an attack on civilization itself." However, he said, the economy of the world will recover.
"Tragic as this event of unprecedented scale is, the free world will not be beaten by terrorists, and the free world — and very particularly the leading trading nations of the world that link us — will continue to do business with each other," said Dimond, who is finishing a four-year term as consul general and is based in Los Angeles.
Dan Mabey, executive director of Utah's International Business Development Office, said some U.S. businesses have now experienced the fear terrorism has caused to companies in other parts of the world.
"We haven't had to live with that fear in the United States," Mabey said. "The impact around the world and the way we do business raises the specter, it raises the bar. It's unfortunate because it just seems to be a few that can affect so many."
Against the backdrop of the new uncertainties facing the economy, analysts said there's a much greater chance that Fed policymakers might opt to cut short-term rates for an eighth time this year — before their next scheduled meeting on Oct. 2.
"I think the odds are high that they will respond to this by lowering interest rates before the October meeting," said Mark Zandi, chief economist at Economy.com.
"When it's all said and done, the economic impact of the attacks will be determined by how people and businesses respond. If they don't panic and cut spending and they work through this, then this will be just an asterisk in our economic history. But if consumers and businesses freeze, it will have a very debilitating impact and the attacks will go down in history as the main cause of the 2001 economic recession."
The attacks did have some immediate economic impacts, both in the United States and around the world.
Reports of the attacks sent some Utah residents flocking to the stores and gas pumps to stock up on food, fuel and emergency supplies. Brenna Hyde, a checker at Macey's grocery store in Ogden, said Tuesday was an incredibly busy day for the store, with people spending upward of $400 on frozen meat, canned goods, milk and bread. One man spent $336.96 on a shopping cart full of turkeys, hams and hot dogs.
Some residents stocked up on survivalist supplies. At Army Navy Outdoor-General in Salt Lake City, light sticks, gas masks and other items were in demand. In Heber City, the Nitro-Pak Preparedness Center saw an increase in business Tuesday. The national company offers items like MREs and other dried foods and first-aid kits.
In the hours after the attacks, gas stations around the United States jacked up their prices and some motorists scuffled in long lines at the pumps. "We got an e-mail from Oklahoma City saying gas was over $6 a gallon," Ronda Hunter said while waiting in line for gas in western Topeka. "The news said it was jumping to $4 a gallon. Is this madness or what?"
The nation's largest oil companies tried to allay concerns Tuesday by freezing their prices and pledging to keep distribution steady, but their efforts seemed to have little immediate impact. Gas prices rose almost immediately in parts of the Midwest.
Within hours of the attacks, the Federal Reserve issued a statement saying it was operating normally and was making credit available to any banks that might need it. Banks reported no major problems during the day.
Government officials and outside analysts said regulators were closely tracking a variety of possible problems. They said they were concerned about a possible wave of selling in the stock markets, and about the loss of computers, records and key personnel among investment firms with offices at the World Trade Center.
The attack could cost insurers more than $5 billion, making it the costliest man-made catastrophe ever, analysts said Tuesday. Specialist reinsurance companies may wind up paying the most for the attack, since insurance underwriters usually protect themselves from potentially crippling losses by splitting the risks — and the premiums — from big policies with reinsurers. Big reinsurers like Lloyd's of London, Munich Reinsurance Co., Berkshire Hathaway and Swiss Re, could be the most exposed, analysts said.
Overseas stock markets fluctuated in volatile trading Wednesday. The FTSE 100 index of leading British shares edged up 1.0 percent, or 46.1 points, at 4,792.1 in midday trading. Germany's Deutsche Boerse and the Paris Stock Exchange followed similar trends. By midday, the Xetra DAX index of German blue chips was down 0.81 percent at 4,238.89, while the Paris CAC 40 nudged up by 0.15 percent to 4,065.66. In Japan, Asia's largest market, the benchmark 225-issue Nikkei Stock Average plunged beneath the key 10,000-point mark for the first time in 17 years as traders dumped shares. The Nikkei closed down 682.85 points, or 6.63 percent, at 9,610.10.
U.S. Deputy Trade Representative and native Utahn Jon Huntsman said Wednesday the terror attacks in the United States should have only a short-term impact on trade and markets. "Other than a temporary impact on the marketplace, I don't see any long-term impact," Huntsman told reporters in Hanoi, the Vietnamese capital. "I think we will have to see the stock market. The stock market will tell us over couple of days what the short-term impact is, but longer term, I don't see any impact at all."
Huntsman said he did not think the attacks would impede economic progress. "I think America will become even more resilient as a nation based upon these recent challenges," he said. "America has always had a unique way of pulling together during a time of need and today is a time of need and I don't think America will fall short in terms of pulling together, moving on economically."
In California, where Disneyland alone draws nearly 38,000 visitors a day, the state's $75 billion tourism industry may be jarred if Tuesday's hijackings of four California-bound airplanes discourage vacationers from flying to Los Angeles and San Francisco.
Contributing: Max B. Knudson, Dave Anderton, The Associated Press, Reuters, New York Times News Service