Two years after the September 11, 2001 terrorist attacks left lower Manhattan in economic turmoil, New York City continues to battle a stubborn recession that has outlasted the rest of the nation. Now there are glimpses of a slow recovery. Post 9-11 New York City is still coming to terms with a changed economic landscape.

A short walk away from the site of the destroyed World Trade Center sits J&R Music and Computer World, the largest computer and software retailer in lower Manhattan. J&R reopened six weeks after the attacks on the Twin Towers, but quickly learned it had to change the way it did business. Gone was the steady stream of thousands of customers from the massive World Trade Center complex.

"There was a war zone in every sense of the word," said Abe Brown, J&R's director of advertising. "Helicopters were flying over-head, soldiers were all over the block. Not only was car traffic inhibited, pedestrian traffic was inhibited. There was physically no way for people to come to our stores."

Mr. Brown recalled the company was reeling from the millions of dollars in losses. "One thing we came to realize fairly early is that certain buildings are just not here," he said. "The Twin Towers are gone, the Verizon building was gone, the post office building was gone and some other buildings are gone. A lot of core business, which came from the World Trade Center buildings, people with expendable income, no longer were working in those buildings."

Manhattan's economic numbers since September 11 paint a bleak picture of the city's economic health. More than 100,000 jobs have been lost, unemployment continues to top eight percent, and some $83 billion in economic output have evaporated. City officials fear the loss of millions of square feet of office space will prevent the financial services industry from ever being as centralized in lower Manhattan.

Shirley Jaffe, vice president of economic development for the Alliance for Downtown New York, a business development group, says the impact of September 11 was devastatingly swift.

"The downward economic trends were multiplied and spiraled downward, downward, downward much more precipitously than we would have expected given the regular downward economic trend," she said.

After September 11, 30 percent of lower Manhattan's residents left the area. Two years later, the housing market is robust with occupancy rates higher than 90 percent. But Ms. Jaffe says New York's thousands of smaller retailers are still struggling.

"There are signs of improvement," she said. "The residential population is back, there is leasing activity down here, streets are open, and there are tourists. There is a general air of cautious optimism. The economy is recovering, things are settling down. Things are not barreling along, things are not sort of booming, but given the state of the economy and the state of the nation, things are slowly starting to move down here."

Construction of the World Trade Center memorial and office space is poised to begin, and the rail link between New Jersey and lower Manhattan, destroyed on September 11, is due to reopen in November. Ms. Gaffe points out these are concrete signs of recovery.

"Things are going to change," she said. "Yes, it will take 10 years for the full picture to become realized, but this is an exciting time for lower Manhattan."

But the city's chief financial officer, William Thompson, is still worried about New York's ability to bounce back. "We've lost since September 11 somewhere in the vicinity of 140,000 - 150,000 jobs," he said. "This city's economy has been placed in a very fragile position. New York City has been in a recession for probably about 30 months now. Would we have been in this recession and in this difficult a fiscal position if it weren't for September 11? We would have already been out."

Jason Bram, an economist for the Federal Reserve Bank of New York, says that although the economic picture was worsened by 9-11, an already faltering economy would have caused a sizeable downturn.

"In the late 90s and in 2000, New York City experienced its fastest job growth since at least the 1950s," he said. "So you're talking about an extraordinary period of economic growth. What happened was in early 2001, things started to turn down and we had some mounting job losses by August, right before the attack. When the attack happened, aside from the horrible tragedy that it caused, it displaced a lot of workers and companies and businesses and just caused a whole lot of disruption for quite a few months."

Some close observers say the amount of vacant commercial office space in the city remains a cause for concern. For Comptroller Thompson, the city has to look toward new types of redevelopment and businesses downtown.

"In the past you've always had the World Trade Center, the businesses, and lower Manhattan to fall back on," he said. "The space isn't there now. It doesn't exist. What are you going to build for the future and for the economy of New York City in the future looking forward?"

Mr. Thompson pointed out there was one positive effect of September 11: New Yorkers came together as they never had before.

"It is from a psychological standpoint for the city, probably something that no other city in this country clearly has had to deal with," he said. "What it did do in one way or another was probably unify the city in ways it never has been before. And that has been one of the unintended side effects and benefits. The city is more together than it's ever been before."

Signs of life and activity abound in lower Manhattan. Tourists now flock to Ground Zero, several large corporations have moved back downtown, and new hotels such as the Ritz-Carlton and Regent have opened directly across the street from the World Trade Center site.