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To: Lucretius who wrote (165082)	5/10/2002 3:05:24 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 436258

Greenspan Delivers Upbeat Assessment Of US Productivity By Dawn Kopecki Of DOW JONES NEWSWIRES CHICAGO (Dow Jones)--Federal Reserve Chairman Alan Greenspan Friday delivered his most upbeat assessment in the last year of the outlook for U.S. productivity, saying the mid-1990s surge is permanent and suggesting that further acceleration is possible. The surge in productivity that began in 1994 resulted in an economic boom that allowed the Fed to keep interest rates low while the economy grew with little inflation. "Something is going on. At a minimum, it is confirming that the shift in growth of the rate of productivity subsequent to 1994 is real," Greenspan said, answering questions after speaking before the Chicago Federal Reserve's 38th Annual Conference on Bank Structure and Competition. Greenspan said the Fed needed to see how the economy performed during a downturn to determine whether the shift was more than just a cyclical boom or broader evidence of the "New Economy." The sustained growth during the most recent recession has made Greenspan more confident than ever that the U.S. economy has entered a new era where advancements in technology have caused large, permanent increases in productivity. "We did have a turn (in the economy) and productivity behaved far better" than it did during previous recessions, he said. "Something did happen to the long-term productivity growth rate some years back," Greenspan said, adding that it has increased the economy's capacity for non-inflationary growth. "Yes it increases the per year GDP growth rate." Greenspan credited the paradigm shift to technological advancements, implying that productivity could grow even more. He said the U.S. economy is only "part way through the degree to which technology exploitation" can increase productivity and profits. He said that there is a "fairly large amount of exploitable capital investment out there" once companies account for risk. Productivity grew in the last quarter of 2001 by 5.5% and another 8.6% in the first quarter of this year, the largest quarterly increase in 19 years. Greenspan has previously cast doubt on the reliability of those numbers, and said that "is not a long-term trend." "Human beings are not smart enough" to sustain that kind of growth, Greenspan said. He said the short-term outlook for capital investment is mixed, however, the "the long-term does look increasingly persuasively good." Contrary to some skeptics, Greenspan additionally said that he doesn't consider the booming U.S. residential real estate market to be a bubble. He credited the brisk demand to an influx of legal and illegal immigrants. "I don't think we have a bubble in house prices," he said, adding that the market for high-end homes costing more than $500,000 has slowed considerably in certain areas. But the fundamentals of the market are still strong, he said. "It certainly is a signal that demand is still very brisk and the reason is immigration," Greenspan said, adding that the ratio of incoming immigrants is likely to correlate with the increased demand for housing. Greenspan also said the U.S. economy is "significantly more capable to adjust to" the problem of rising oil prices. "There is a Middle East crisis premium in all crude oil prices around the world," he said. But there would need to be a sharp spike in prices before it would damage the U.S. economy, he said. -By Dawn Kopecki, Dow Jones Newswires; 202-862-6637; dawn.kopecki@dowjones.com (Joseph Rebello in Washington contributed to this story.)