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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: Dana Johnson who wrote (56318)	10/13/2000 1:18:33 AM
From: Junkyardawg	Respond to of 63513

October 12, 2000 Fed Sees Further Productivity Gains By REUTERS Filed at 11:03 p.m. ET NEW YORK (Reuters) - Two top U.S. Federal Reserve officials said on Thursday stunning U.S productivity gains that have helped fuel rapid, non-inflationary economic growth showed few signs of slowing. Federal Reserve Bank of Dallas President Robert McTeer said the booming U.S. economy was gliding to a soft landing, but added steep stock market losses and soaring energy costs were dark spots in an otherwise bright economic picture. ``It is increasingly clear that productivity growth is rapidly gaining momentum once again,'' Federal Reserve Bank of Cleveland President Jerry Jordan told the Ohio Aerospace Institute in Cleveland. ``If past technological revolutions are a good indication, this may be only the beginning.'' He said the United States was in the midst of a revolution akin to prior periods of major economic growth, including the industrial revolution and the era after electricity was introduced. Both Jordan and McTeer are non-voting members of the Fed's rate-setting Federal Open Market Committee. McTeer, the Fed's most outspoken proponent of a ``new economic paradigm'' that allows the economy to grow at a fiery clip once considered inflationary, agreed productivity gains looked set to continue. ``The Goldilocks economy is still OK,'' McTeer said in a speech to a business group in Dallas. ``It has been hotter than we used to think was safe, but it has turned out to be pretty safe.'' Fed officials have credited the steep rise in productivity for helping keep inflation under control even though the U.S. unemployment rate has hovered near a 30-year low and growth has boomed ahead. STOCK SLIDE, OIL SPIKE JANGLE NERVES Sounding a rare sour note on the economic outlook, McTeer said sliding equity prices ``makes one a little nervous.'' Major U.S. stock gauges plummeted on Thursday as escalating Middle East violence, surging energy costs and earnings warnings from retails Home Depot Inc. spooked Wall Street. The Dow Jones industrial average plunged 3.64 percent to its lowest closing level since March. The battered technology-heavy Nasdaq composite index tumbled 2.96 percent to its lowest level since November 1999. Some financial market players have expressed concern tumbling stock prices, by eating into consumer wealth, could help turn a gradual economic slowdown into a more worrisome slump. But McTeer showed few concerns a gradual slowdown risked spiraling into a recession. ``The general consensus is there was a significant slowdown in the third quarter and that we are probably heading toward what people are calling a soft landing. That is probably true,'' McTeer said. ``People want to know since I'm the optimist, what do I worry about? I want to say nothing,'' he said. ``But if they press, the most worrisome thing in the short term are high energy prices, oil and gas prices.'' U.S. crude oil prices soared sharply higher above $36 a barrel on Thursday, pushing back toward decade peaks hit last month. ``We have a little bit of inflation creep over the past year,'' he said. ``Most of the (inflation) backup from late 1999 until now has been the result of rising energy prices.'' Jordan said he used to be a skeptic of so-called new economic models but has been swayed by recent evidence. ``While I assure you that the economic laws that govern markets have not been repealed, I cannot ignore the sustained flow of economic data that indicates something is indeed new about this economy,'' Jordan said. The Fed, which raised interest rates six times from May 1999 to June 2000 in an effort to slow the economy to a less inflationary level, last week held benchmark short-term rates steady at 6.50 percent.