THE ECONOMIC IMPACT OF SEPTEMBER 11th

1
THE ECONOMIC IMPACT OF SEPTEMBER 11th
An Overview of the Aftermath and its Implications
Prepared by James T. Koshiba, Hawaii
Community Loan Fund Prepared for The
Kauai Small Business Development Center
Date Presented November 1, 2001
2
PURPOSE

• Answer three key questions
• - Where are we now?
• - Where are we headed?
• - What is being / can / should be done?

3
WHERE ARE WE NOW?

• Visitor Arrivals hover near 80 of last years
  levels.
• Domestic arrivals have rebounded. Japan arrivals
  have not.

4
WHERE ARE WE NOW?

• Visitor arrivals matter because Travel Tourism
  are critical sectors of our economy.
• One-third of total production (GSP), one-fourth
  of our tax revenue, and one-in-four jobs from
  Travel Tourism.

5
WHERE ARE WE NOW?

• Since September 11, more than 21,000 people have
  filed for unemployment insurance benefits
  statewide.
• In the last week of September, claims hit 4x 2000
  levels.

6
WHERE ARE WE NOW?

• Hotels, Restaurants, Othr. Retail, and Trans.
  hardest hit.
• Construction, FIRE, and Othr. Svc. may see
  delayed effects.

7
WHERE ARE WE NOW?

• Domestic visitor arrivals have rebounded on
  Kauai.
• Good performance in time-share segment.
• Shift in tourism away from high-density areas.

8
WHERE ARE WE NOW?

• Kauais labor market data is mixed
• Lower increases over last year than other
  islands. ()
• Kauai 6.2 of total claims, but only 4.6
  of state
• workforce. (-)

9
WHERE ARE WE HEADED?

• No one really knows, but
• Key questions are how severe? and how long?
• We can make educated guesses by looking at
• Available local economic and impact forecasts.
• Key tourism variables airlift, income, prices.
• The impact of terrorism on tourism in other
  places.
• Our own history following the Gulf War.

10
WHERE ARE WE HEADED?

• The Forecasts
• - Most economists unwilling to forecast the
  severity or
• duration at this time too much uncertainty.
• - DBEDT has developed 3 possible scenarios
  to
• describe the impact of 9/11 on the state
  economy.

11
WHERE ARE WE HEADED?

• Influential Variables
• - Airlift steady, prices falling. Exchange
  rates?
• - Incomes forecast weakness in the Japan
  and U.S.
• economies.

12
(No Transcript)
13
WHERE ARE WE HEADED?

• Study of visitor counts in Spain following
  terrorist incidents.

14
WHERE ARE WE HEADED?

• Research on Terrorism in Other Places

• - Arrivals and market share typically
  rebound fully following
• the downturn, but full recovery may take 8-10
  quarters.
• - There may be a delayed reaction with
  declining arrivals
• experienced 2-3 quarters (6-9 months) after
  incident.
• - Duration of decline depends upon visitor
  country of origin
• (e.g., Europeans quicker to return than
  Americans and
• Asians).
• - No direct comparisons (different
  consumers, different
• product). Only helps define ranges and worst
  case
• scenarios.

15
WHERE ARE WE HEADED?

• Summing Up

- DBEDT 290 million to 1.2 billion in
lost GSP 10,000 to 30,000 jobs lost (500 to
2,000 on Kauai). - Forecast weakness in
the Japan and US economies suggests duration
might be extend through 2002. - The
experience of other places indicates full
recovery happens, but may take up to 10
quarters. - There may also be a delayed
visitor reaction will arrivals falling 6-9
months after the incident.
16
WHATS BEING DONE?

• A Few Examples (full inventory attached)

- State Government 100 million in CIP
Projects tax incentives to encourage
construction tourism marketing, tax
breaks. - Financial Institutions flexible
loan payment modifications and refinancing for
borrowers in trouble. - U.S. S.B.A.
expanded eligibility for the Economic Injury
Disaster Loan Program. Increased funding for
existing loan programs and small business
counseling. - U.S. DOL/Local Workforce
Investment Board extended unemployment
benefits expanded eligibility for
job-training funds available to cover cost of
on-the- job training.
17
WHAT SHOULD BE DONE?

• Good Responses Will

- Coordinate Efforts. Avoid duplication of
effort and provide single point of
contact/information (e.g., banks, alternative
lenders could complement SBA lending
activities T.A. coordinated with lending). -
Allocate Contingency Resources. Contingency
should be built in because of high degree
of uncertainty and possible of delayed
effects. - Address Relief, Stimulus, and
Repositioning. Short-term relief for
temporary needs. Stimulus to bolster spending
and confidence. Reposition through
diversification.