Greenspan Projects Jobs Revival, Warns On Deficit

By Agence France-Presse U.S. Federal Reserve Chairman Alan Greenspan said Nov. 6 the odds favor a revival in longed-for American jobs, removing a major impediment to sustained economic expansion. "One prominent concern is that, if the labor market remains weak, household confidence will suffer, with detrimental consequences for spending," Greenspan said. "The odds, however, do increasingly favor a revival in job creation," the 77-year-old central bank chief told a meeting of the Securities Industry Association in Boca Raton, Fla. Figures due Friday are expected to show the U.S. unemployment rate held steady at 6.1% in October as businesses hired a modest number of extra workers. The labor market has lagged long behind the rest of the economy, with companies shedding about a million jobs since November 2001. The longer-term economic outlook was menaced, however, by a bulging federal government deficit, which exploded to an unprecedented $374 billion in 2003, Greenspan warned. "The foregoing relatively optimistic short-term outlook for the U.S. economy is playing out against a backdrop of growing longer-term concern in financial markets about our federal budget," he said. Given wars in Afghanistan and Iraq, anti-terrorism defenses, an economic downturn and a retrenchment in stock markets, some deterioration in the short-term deficit was probably unavoidable, Greenspan said. But the resulting higher debt has complicated the task of paying for an impending wave of retirees from the baby-boom generation, he said. Current tax rates could not pay for the pensions and health benefits being promised, the central bank governor said. Recent budget deliberations among U.S. policymakers were "not encouraging," Greenspan said. "No significant constituency seems to support taking the actions that will be necessary to move toward, and one hopes achieve, budget balance." Senior Federal Reserve Governor Ben Bernanke told another conference in Pittsburgh that it would be premature to say a labor market recovery already was under way. "Nevetheless, I find it reasonable to expect that job growth will begin to pick up in the next quarter or two," he said. Copyright Agence France-Presse, 2003