How Deep the Damage?

An economist believes the fallout of the terrorist attacks may be sharp and short, but admits there is no way to know for sure

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No one yet knows exactly what the Sept. 11 terrorist attacks did to the U.S. economy -- or to the attitudes of its business owners. But an economist who has been measuring the small-business economic outlook for nearly 30 years is not willing to say that the leveling of the World Trade Center towers has crushed all possibility of avoiding a recession.

After the latest monthly survey of small-business owners in August, William C. Dunkelberg, chief economist for the National Federation of Independent Business (NFIB), gingerly ventured that the economy had bottomed after a year of slowing and was ready to start growing for the majority of small companies. The survey's "optimism index" had jumped 3 points on the strength of earnings growth, hiring plans, and business outlook among small-company owners.

History shows, Dunkelberg says, that the shock to the system delivered by the terrorist attack will mean a lot in the short term, but not in the long term. Nonetheless, he is dividing the answers from his September survey of small businesses into responses made before Sept. 11 and responses after that date, to fully gauge the hit on optimism. Those results will be released by mid-October. "My guess is that a lot will have changed, but only for the short term," Dunkelberg says. At the same time, he muses, "If I could guess that well, I wouldn't have to ask them."

By Theresa Forsman in New York