New York City goes on death watch every decade or so. Wall Street and the economy crash, the city teeters on bankruptcy, crime rates rise, high-paying jobs disappear. Manhattan becomes unlivable for families. You can't get a decent martini. Yet the city always manages to reinvent itself and bounce back. Will it do so again?

Until Sept. 11, Manhattan was the centre of the universe, the planet's undisputed financial and cultural capital, and the most fun place to be, whether you were an actor, restaurateur, bond trader, magazine editor or captain of industry. It was Imperial Rome in the second century AD, at the very height of its powers, even if signs of complacency and greed were everywhere.

Then the Visigoths attacked and New York, the financial district in particular, got pummelled. Look at what has happened since then. Horror-struck tenants have left downtown. Some travelled north to midtown; others left Manhattan entirely. Goldman Sachs and Morgan Stanley are among the high-profile denizens of lower Manhattan that are acquiring office space outside of the city. Jersey City, N.J., which is close to Manhattan and whose taxes are lower, has been the prime beneficiary of the newly mobile. The downtown New York office vacancy rate is now 20 per cent, up from 9 per cent before Sept. 11. An on-line property brokerage called TenantWise.com estimates that more than 62,000 jobs, most finance-related, have disappeared from lower Manhattan in the past year.

Of course, the terrorist attacks can't take all the blame. Had they not happened, Manhattan in general and the financial district in particular would still have landed on the urban sick list. The stock market party ended in 2000.

A year later, it was apparent the market carnage was more than an overdue correction; this was a full-fledged bear mauling. With next to no initial public offerings or M&A activity, jobs were doomed and the survivors would have to take less pay. When this happens, two things occur. The financial services industry creates less wealth, for itself and for the city -- the tax base erodes and budget deficits return -- and the steady stream of young talented people arriving from the hinterland slows to a trickle. The terrorist attacks have accelerated this process.

New York, of course, has been in dire condition before. In the late 1880s, the stock market collapsed and there were shootings on Wall Street. The Crash of 1929 ushered in the Great Depression, and the city was written off again. Then came the Second World War, the lengthy bear market of the 1970s and several recessions. The early 1990s recession was particularly brutal because it came with a monster real estate collapse. Once again, the city bounced back. With the possible exception of Imperial Rome, the boom of the 1990s turned New York into the greatest wealth machine in history. As far as New Yorkers were concerned, the world ended at the East River.

So why, after a setback whose duration reflects the tragedy of Sept. 11 and the deflation of the stock market bubble, wouldn't New York revive again? The difference this time is a fear of losing your life. If you're convinced that Manhattan remains a terrorist target, you wouldn't want to live there under any circumstance, especially if you have children.

A friend of mine, a Canadian lawyer who spent most of his career in New York and now lives in Toronto, is supposed to return to New York in a year or so.

Before Sept. 11, there was no question that he and his family would live in Manhattan, as they did before. Now he's not sure he wants to return at all. And if he does go, he's definitely sure he would install his family outside New York City and commute to his job.

How many other professionals have the same anxieties about Manhattan now? And if it's a big number, wouldn't Manhattan die a death of a million cuts? Every city has its era, and maybe New York's is over.

The trouble with the doom-and-gloom scenario is that, in spite of the headlines and job-loss figures, things aren't as bad as they seem.

Although the media concentrate on the companies that are quietly assembling real estate beyond the city, the real story is the vast majority that have stayed put, not necessarily on Manhattan's southern tip but elsewhere on the island.

In fact, almost two-thirds of the jobs that have vanished from the financial district have simply migrated a few kilometres north. Meanwhile, the economics of supply and demand are kicking in. As commercial and residential vacancies rise, rents have come down. There are a lot of bargains in lower Manhattan, and interest is picking up again. Yesterday, Toronto's Brookfield Properties signalled its optimism for a lower Manhattan recovery with a $158-million (U.S.) purchase of Lehman's 51-per-cent interest in Three World Financial Center.

The area may never again form the heart of the city's financial district, but there's a good chance that it will reinvent itself as something else, just as midtown, once a financial backwater, is reinventing itself as the new Wall Street. All bets would be off, of course, if New York were hit again by terrorists. If the loss of life were severe, you could write the city off as a perpetual target and no-man's land.

Absent another catastrophe, though, New York will do what it has always done, which is fight back. The reason it became so powerful in the first place is that it attracts the most aggressive and optimistic personalities on the planet. Now, if only the bear market would end.