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Fed: Employment Still Lags
By James Toedtman, Chief Economic Correspondent Newsday.com
April 22, 2004
WASHINGTON - The nation's economic recovery is proceeding vigorously, Federal Reserve Chairman Alan Greenspan said yesterday, raising the prospect that interest rates "must rise at some point."
Only workers and job seekers have yet to benefit from the upswing. Greenspan told Congress' Joint Economic Committee that retail sales, orders for big ticket items, productivity and corporate profits are growing nicely, while early signs indicate inflation will be manageable.
But workers who bore the brunt of the recession and sluggish recovery still face obstacles. "The anxiety that many in our work force feel will not subside quickly," Greenspan said.
Though companies have begun to hire, and 308,000 new jobs were generated last month, employment continues to lag. Moreover, wages have not kept pace with the recovery or with corporate profits. Corporate profits grew 18.3 percent from 2002 to 2003. Between December 2001 and last month, the national average weekly earnings adjusted for inflation fell from $281.72 to $275.92, or 2.1 percent.
Long-term unemployment remains a serious problem. Last month, 85,000 Americans a week exhausted unemployment benefits, compared with 35,000 a week in September 2000. During the same period, the average length of unemployment grew from 12 weeks to 20 weeks. "These developments have led to a notable rise in insecurity among workers," Greenspan said. He called for Congress to extend the current 26-week unemployment benefits by an extra 13 weeks.
Greenspan's pronouncements were echoed in two reports released yesterday. The International Monetary Fund forecast solid global growth for the next two years. And in its monthly Beige Book analysis of regional economic conditions, the Fed reported "widespread" growth from mid-February through early April with "modest" increases in overall prices.
New York's momentum was generated by Wall Street's "exceptionally strong first quarter" and by a rebound in tourism and commercial real estate, the Fed concluded.
On Long Island, retail sales were up 14 percent in March and the median home sale price in Nassau was $395,000, up 12.2 percent, and $322,500 in Suffolk, up 15.6 percent.
Seldom shy with his advice, Greenspan warned the committee that energy prices, particularly natural gas prices, would continue to rise as the global economy continues to recover. He said that the soaring price of scrap metal and raw materials was being driven by China's rapid economic development.
He called Congress' effort to block expensing of stock options "a bad mistake." He again warned that future Medicare costs could become unmanageable.
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