Up Front
Edited by Sheridan Prasso
Talk Show
For an airline, "the government is precisely the kind of shareholder you want.... What are they going to do, come down to a board meeting and demand management changes?"
-- Austan Goolsbee, a University of Chicago economist, objecting to the U.S. government's plan to take equity stakes in the airlines
GOOD TASTE
Rescuing Workers' Palates
As New Yorkers struggle to get back to normal after the devastating World Trade Center attacks, it is in a curious way reassuring to realize that one attribute of residents has remained undiminished: their fussiness about food.
That quickly became apparent to the American Red Cross when, on September 11, it moved in to set up its usual mobile kitchen operations on the periphery of the disaster area to feed rescue workers and victims. Alas, as Robert Bender Jr., head of the Greater New York chapter, recalls, canned ravioli and other bulk-prep fare standard at disaster sites "didn't work here at all." Too many workers simply turned up their noses.
Into the breech stepped New York's top-rated chefs--from Tribeca Grill, Daniel, Danube, Tavern on the Green, and Harlem institution Sylvia's, among others--with top-notch cuisine shuttled down from their kitchens, or whipped up by the chefs themselves on a nearby docked cruise ship. Even after the restaurants turned back to serving regular customers, the Red Cross didn't go back to the usual canteen-style fare. It switched instead to caterers.
With New York restaurants reeling from a dearth of visitors, chief tourism promoter Cristyne L. Nicholas would like to think the donations served as a sampling opportunity for a hitherto untapped audience for fine dining: "I hope when this is over, [the rescue workers] will be going to Le Cirque and Jean-Georges."
By Gerry Khermouch
THE TRAVEL BUG
How Long Will the Fear Factor Last?
Cheaper fares may be luring some people back to the skies, but a new poll shows travel will remain depressed for some time. The Travel Business Roundtable findings released on Oct. 9 find 20% of people say they'll discourage friends and relatives from flying during the holidays, and nearly 80% say they believe another terrorist attack is likely. Among business travelers who've cut back on flying, a third say they won't be taking as many out-of-town trips for at least six months; two-thirds say they wouldn't travel more even if security were dramatically increased.
The economic hit from fear extends beyond airlines. Car rental counters report significant decreases at airports. The hotel industry, says Loews Hotels CEO Jonathan Tisch, will likely lose $2 billion this year. "All but critical corporate travel is being delayed, and individuals are canceling or postponing personal travel," he says. Next year should be better, argues Hilton Hotels (HLT
) CEO Stephen Bollenbach: "The American people are not going to live in a hole in the ground. They'll be back." But not soon.
By Michael Arndt
HOME FRONT
Reality Catches Up with Real Estate
Until now, one of the remaining pillars of the economy has been the housing market. But that's weakening, too. "Like everything else, this bright spot in the American economy has been eclipsed," says David Lereah, chief economist for the National Association of Realtors.
Indeed, sales of existing homes are down 5% nationwide, says Lereah, who is cutting his existing-home sales forecast to a seasonally adjusted annual rate of 5.2 million. Those sales had hit a new record in August, rising 5.8% to an annual rate of 5.5 million homes. New-home sales, which logged in at an annual rate of 898,000 in August, are also expected to drop to 790,000 by December.
Still, it's not all gloom and doom. This will still be the industry's second-best year ever. And economists say mortgage rates, at their lowest level in two years, should help prevent the market from toppling. Huge backlogs at homebuilders will help, too.
Industry experts hope for a rebound by next spring. But, cautions NAHB chief economist David Seiders, if there are more terrorist attacks or the economy continues to wane, "all bets are off."
By Stephanie Anderson Forest
THE LIST
Best Places to Be Unemployed
Joblessness is at a nine-year high and President Bush is proposing federal help. Even the highest weekly unemployment benefits are less than half of workers' previous pay.
THE LIST
The Highest Weekly Unemployment Benefits
MAXIMUM % OF INCOME REPLACED
STATE BENEFIT* FOR AVERAGE WORKER
MASSACHUSETTS $527 36%
WASHINGTON 441 40
PENNSYLVANIA 438 40
RHODE ISLAND 437 41
NEW JERSEY 429 35
CONNECTICUT 427 27
MINNESOTA 427 43
NEW YORK 405 29
ILLINOIS 392 35
OREGON 376 38
* for a worker with two children and an employed spouse
Data: Economic Policy Institute
THE BIG PICTURE
SEPTEMBER 11
No Silver Lining for Tech Sales
The business of rebuilding after the September 11 attacks is not going to pull tech companies out of their financial doldrums. True, some companies have gotten large computer equipment orders. Dell Computer (DELL
), for example, is currently shipping 25,000 new PCs to Morgan Stanley Dean Witter, which had to relocate more than 20 floors of offices lost in the World Trade Center. And some analysts expect Cisco Systems (CSCO
) to receive nearly $60 million in replacement orders in the coming months. Cisco and Dell have stuck by previous estimates for current-quarter sales.
But replacements will do little to offset the bleak tech picture, which was only made worse by the attacks. Since September 11, some analysts have lopped $350 million off projections for Cisco's 2002 profits, despite the new orders.
Others are faring no better. Estimates for 2002 sales at Extreme Networks (EXTR
), which sells replacement networking gear to the Pentagon, have been shaved by $100 million--that's 18%--since the attack. "Rebuilding will not offset the slowing economy," says Merrill Lynch analyst Sam Wilson.
Nor do software companies expect a jump. Advent Software (ADVS
), for example, had more than 25 customers in the Twin Towers. But any replacement software is covered under existing licenses. "Let's get real about this," says Advent's Chief Financial Officer Irv Lichtenwald. "Emotionally, much of the world is reassessing their priorities." And for now at least, those priorities don't include a tech buying spree.
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Corrections and Clarifications
"No silver lining for tech sales" (Up Front, Oct. 22) incorrectly reported that Dell Computer Corp. shipped replacement PCs to Morgan Stanley Dean Witter & Co. after the September 11 attacks. Dell has sold more than 24,000 replacement PCs and servers, but none of them to Morgan Stanley.
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By Ben Elgin and Jim Kerstetter
NOTEWORTHY SITES
Now, Cyber Solace
The crisis is prompting people to reach out to religion in search of answers. And a group of Carmelite nuns is reaching back--online. The 15 sisters of the Carmelites of Indianapolis run a Web site, www.praythenews.com, aimed at connecting with the public. On it, they offer spiritual reflections on current events, such as the question President Bush asked in his address to the nation, "Why do they hate us?" Sister Therese posts the response: "We can no longer meddle in the politics of other countries with the intention of serving our own self-interest. We are indeed one body." Traffic is up 34% since September 11, to 19,400 visitors a month.
The nuns, most of them graying and past middle age, started online outreach in March to show that a life of prayer does not mean a life of isolation. They wanted to attract young women to the order and challenge the misconception that nuns are detached from the world. They've assembled a board of advisers, hired an ad agency, and tallied 24 queries about joining, compared with 10 last year.
The "light a candle" part of the site, where visitors submit prayers, is receiving about 200 a day, up threefold from before the crisis. "Most of the prayers we're getting are really for peace," says Sister Therese, including one submitted to Allah. "We don't get anything like, `Go get 'em."'
By Kimberly Weisul
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Copyright 2001, Bloomberg L.P.
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