recession
...nd productivity can also be viewed when discussing the causes that led to the recession. On the dawn of the terrorist attacks on September 11, 2001, the Federal Reserve yet again cut interest rates half a percentage point on September 17, 2001. This was also in an effort to boost the United States economy, as well as the stock market in light of, “the worst terrorist attacks ever against the United States.”(Feds Cut Rates Again) This half a percentage point tax cut, being the eighth for the year, was announced an hour before the U.S. stock market reopened after a four-day close, their longest since the Great Depression. In a statement the Federal Reserve policymakers said, “They will continue to supply unusually large volumes of liquidity to the financial markets…” (Fed Cuts Rates Again.) Since the Federal Reserve “sets the tone” because of its interest rate policy and its control over bank reserves, the level of liquidity is in part due to policies made by the Federal Reserve. With an already struggling economy, the terrorist attacks of September 11, 2001 confirmed that the United States was in a recession. The U.S. unemployment rate skyrocketed. It is noticed that employment peaked in March 2001 and subsequently declined through January 2002. (Employment Situation Summary.) February 2002 marked the first increase in employment in seven months. In a Labor Department report ending September 22, 2001, it reported, “New jobless claims jumped by a seasonally adjusted fifty eight thousand to four hundred and fifty thousand. This marked the highest level of unemployment since July 25, 1992. Evidence shows, however, that in the wake of the terrorist attacks those figures revealed the first wave of layoffs stemming from the attacks. The second wave of layoffs came with a fury from the travel and tourism industry, which was severely impacted. With airliners grounded for days, and consumers afraid to fly, this meant bad business for the airline industry. Economist Bill Cheney was quoted as saying, “nothing dampens consumer confidence and spending like job losses, even if you aren’t the one losing the job.” (US unemployment rockets.) This effect was felt through the U.S. economy with consumers’ reduction in spending, vacations and flying. This effect thus led to a ripple effect that was further felt in the support industries and then passed on to the rest of the economy. Also, because of economic integration and increased globalization, the effects of the slowdown of the U.S. economy were felt in many other parts of the world such as Latin America, Europe and some Asian countries. Furthermore, Japan has also experienced a recession and some of the factors are due to the downturn of the U.S. economy, their biggest trading partner. The U.S. economy fell into the deepest recession since the Second World War. Further effects of the terrorist attacks were on the financial markets because telecommunications, as well as the trading ability was severely hurt. In addition, the terrorist attacks also disrupted payment transfers usually measured in trillions of dollars. (Greenspan on Economic Effects of Terrorist Attacks.) This drawback was centered in the banks. The Federal Reserve, however, met this needs through, “lending at the discount window and infusion of funds through open market operations.”(Greenspan on Economic Effects of...) Furthermore, according to Greenspan, “For the longer term, prospects for continued rapid technological advance and associated faster productivity growth are scarcely diminished.”(Greenspan on Economic Effects...) At the start of the economic year 2002, talks of the recession varied. Greenspan noted, “Rapid response times are a result of technological advances.” Economists and government officials believe that the recession was almost to a complete end, though they are unsure of how strong the recovery will be. The tax cut made by President Bush was hailed for the modest but high rate at which the economy is growing. The economy, however, is not out of the complete dark as yet since problems with economic weakness abroad and the unemployment rate that remains high even in light of the recovery. The Bureau of Economic Analysis released data in February 2002 that stated personal income increased $49.9 billion, and disposable income increased $49.5 billion. Personal consumption expenditure also increased by $44.6 billion. The fourth and final quarter of 2001 the Gross Domestic Product increased at an annual rate of 1.7 percent. (Bureau of Economic Analysis.) The U.S. economy was s...