In the days following Sept. 11, some experts predicted that the terrorist acts would deal a severe blow to an already slumping economy, and most saw at least a period of deep uncertainty ahead.
Since then, the US and world economies have had to grapple with the end of federal budget surpluses, Europe's tricky launch of a new currency, and the financial collapse of a nation (Argentina) and a high-profile corporation (Enron).
All worrisome events, piled one atop another. But instead of plunging into a deeper recession, both the US and world economies seem headed toward a turnaround that, while modest, surprises pessimists.
In America, "leading indicators" designed to forecast the economy, recorded their biggest one-month jump in five years Tuesday. White House economist Glenn Hubbard said yesterday that he sees the recession that began last March ending this winter. And in November, a global leading indicator turned up, hinting at recovery worldwide.
"All of the worst-case scenarios that could be, and were, imagined ... did not unfold," observes Edward Yardeni, an economist at Deutsche Bank Alex. Brown in New York. "The war against terrorism in Afghanistan has been a spectacular success. Consumer spending did not plunge, as was widely expected."
Even Alan Greenspan, the Fed chairman who two weeks ago highlighted "significant risks" in the US economy, sounded an upbeat note yesterday in Senate testimony: "Some of the forces that have been restraining the economy over the past year are starting to diminish and ... activity is beginning to firm."
The economy's remarkable resilience stems from several factors. The fear of another terrorist attack in the US has not been borne out. The Federal Reserve continued to cut interest rates. Rising Russian oil exports helped drive down crude-oil prices. Except for those laid off, consumers have seen their incomes grow huskily in recent months.
Significantly, too, markets have decided so far that the problems of Enron and Argentina are relatively contained, not warning signs of larger distress to come.
Challenges still persist. Japan's output continues to shrink, and many predict a weak recovery in the US.
But many trends point to an encouraging fact: Bad economic events often turn out less bad than expected.
"Markets tend to overshoot," whether on good news or bad, says Salomon Smith Barney economist Richard Reid - who has had to put up with teasing because he shares a name with the shoe-bomb suspect now in the news.
It was just days after Sept. 11, for example, that stock indexes hit their lows for 2001, only to bounce back more than 10 percent by December.
In recent years, other challenging events have also gone better than some foresaw:
The "Y2K" transition for computer software proved to be a peep, not a bang. When the millennium came along on Jan. 1, 2000, most all computers recognized the date correctly, thanks to diligent corporate preparations.
In the summer of 1998, when Russia defaulted on some of its debts and the ruble was devalued sharply, analysts warned of prolonged trouble. But Russia has had three years of economic growth and rising living standards. The devaluation discouraged imports and encouraged domestic production. Rising oil prices helped producers there.
The US, meanwhile, has proved over the last five years that economists were wrong in figuring that if unemployment fell below 6 percent, inflation would start rising again. (Workers would demand more pay, pushing up costs, the theory held in part.) Instead, joblessness fell as low as 3.9 percent in September 2000, while inflation only edged a bit above 3 percent.
"It will be a long time, if ever, before anyone has to worry about inflation again," writes Bruce Steinberg, chief economist of Merrill Lynch in New York.
Mr. Greenspan's boldness, in not raising interest rates as unemployment fell, shows how sometimes daring policies can avert crises or encourage faster growth.
Today, with a largely stalled world economy, much pressure rests on the giant US economy to recover. Given Greenspan's remarks, it is unclear whether the Fed will lower interest rates once again next Wednesday.
The rapid switch from a $127 billion surplus in the US federal budget in fiscal 2001 to a $106 billion deficit foreseen by the Bush administration in 2002 doesn't appear to have hurt the economy much. But it could have kept long-term interest rates from falling further, as investors assumed the government would borrow more in the future. Greenspan warned lawmakers yesterday not to overspend.
At this point, most economists and officials are forecasting the US economy will bounce back this winter or spring. The euro countries will pick up economic speed later this year. But Japan, they say, remains in trouble.
The United Nations forecasts that world output would grow at a mere 1.3 percent pace this year and global trade 0.8 percent. Those are gloomy numbers.
And, while not as bad as feared, the economic imprint of Sept. 11 remains significant. A study released recently by the Milken Institute in Los Angeles predicts the attacks will cost 1.64 million jobs by the end of 2002. Tourism and air travel have been hit hardest. Among cities, New York will suffer as it rebuilds damaged or destroyed real estate.