The 9/11 terror attacks were a geopolitical gut punch that did little to mute the overall economy on the mend from the dot-com bust.
Putting dollars-and-cents analysis on that sad day 20 years ago is hard for this native New Yorker. Thankfully, the long-term damage to the overall business world has been modest. Even my hometown enjoyed, until the pandemic, a business revival.
My trusty spreadsheet — filled with government economic data from the fateful day through this summer — reveals a somewhat sluggish post-9/11 economy, both locally and nationwide. Let’s not forget that these two decades included the mortgage meltdown and ensuing housing crash creating the Great Recession, plus the job-slashing business limitations of the pandemic era.
So here’s how some key economic benchmarks performed — before and after 9/11 …
Jobs? California employment grew at an 0.9% annual pace from 2001 through pre-pandemic 2019, slightly better than the nation’s 0.7% growth. But look at 1990-2001: 1.5% annual growth statewide and a 1.7% U.S. hiring pace.
Paychecks? Per capita income in California grew 4% a year, 2001 to 2020, topping the national rate of 3.4%. Again, this is down from 4.3% annual growth statewide in the ’90s and a 4.4% U.S. pace.
Inflation? Slow growth muted cost-of-living increases. The national Consumer Price Index rose at a 2.1% annual pace in the 20 years ended in June vs. 2.9% in the ’90s.
Homes? Low inflation and slow economies pushed down interest rates. For example, 30-year mortgages averaged 8% in 1990-2001 and 4.8% afterward. Even with the pain of the real estate collapse not long after 9/11, California price gains averaged 4.8% annually in 2001-2021 and 3.7% nationally. Compare those jumps to 3.7% annual price statewide in the ’90s and a 2.4% U.S. appreciation rate.
Now, the relatively meek post-9/11 economy didn’t treat all industries equally.
When my spreadsheet used a Wall Street lens — an analysis of stock performance in 83 industries by Charles Rother of American Strategic Capital of Costa Mesa — you see huge variances in 20 years worth of stock total return, that’s price gains plus dividends.
For example, is it a shock that war is often profitable ground for defense contractors?
The 9/11 attack sent American troops first to Iraq and then Afghanistan. Defense spending in the five years after 9/11 grew at a pace not seen since the days of the Vietnam War.
And, surprise, surprise, shares of defense and aerospace companies — big in California — grew at an annualized 11.8% the past 20 years, well above the 9.5% gain of the broad market’s S&P 500 benchmark.
However, 23 of the 83 industries tracked by Rother’s analysis topped defense and aerospace’s performance. These winners paint a portrait of post-9/11 business life.
The web: In 2001, technology was still reeling from the dot.com bubble’s collapse. History tells us that the stock slide wasn’t because the internet was a fad, but that investors were just too enthusiastic. Since 9/11, shares of internet service companies — many California-based — rose at a 19% a year pace; application software jumped 15% a year; and systems software rose 14%.
“Customers will pay a premium for technology that is easy to use,” says Rother, noting the rise of Apple and Google in this post-9/11 era.
Making stuff: Certain U.S. manufacturers were hot after 9/11. Resurgent technology needed hardware and the stocks of those manufacturers rose at a 17% annual pace since 2001. Electrical component makers rose 12%. Other factory winners included specialty chemicals (16%); industrial machinery (14%); and container makes (13%).
Logistics: Technology exploded the potential of online shopping and rearranged how goods were delivered. So “road and rails” — various transportation stocks — jumped at an 18% annual pace since 2001 as “trading companies and distributors” rose 14%.
Healthcare: Who saw Obamacare coming eight years after 9/11 — and it sticking around until today? That explains why shares of managed healthcare companies appreciated at a 17% annual rate over the past two decades.
Consumerism: Amidst all the turmoil — geopolitical and economic — of the past 20 years, Americans kept shopping. So industries outperforming defense contractors included restaurants (up 16% a year); home improvement (14%); apparel chains (13%); “personal” products (12%); and general merchandise stores — a niche including the discount “dollar shops” (up 12%).
Oh, and the top gainer of all? Did you guess footwear and its 20% annualized gains since 9/11? That’s part fitness, part fashion.
“Exceptional marketing companies emotionally connect with their customers — this creates higher brand loyalty and profit margins,” says Rother, noting footwear’s Nike as a prime example.
The industries at the bottom of this stock market scorecard also tell economic tales.
Airlines: Down 0.1% a year since 9/11. Air travel halted for weeks, post 9/11, as the globe rethought its airport security. The industry had barely recovered to get hit by the Great Recession and the next rebound was short-circuited by the pandemic. Consider that by CPI math, air fares are 3% cheaper this year than they were in 2001.
Automakers: Down 1.2% a year since 9/11. The industry dodged much terror attack impact but was clobbered by the Great Recession. Even in pre-pandemic 2019, U.S. car sales were 1% below 2001.
Wireless service providers: Down 1.4% a year since 9/11. Almost everybody has cell service. Almost everybody has a smartphone. So the game’s become a costly battle for market share, a fight investors don’t like.
Gas utilities: Down 6.1% a year since 9/11. Middle East wars pushed energy prices higher. That made opportunities for technology like fracking to boost supply — and natural gas prices plummeted. Not to mention, climate change efforts directly target natural gas — a fight that’s made this industry the worst post-9/11 investment.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]