Newspaper article The Christian Science Monitor

US Economy Is Steadier Than It Used to Be

Newspaper article The Christian Science Monitor

US Economy Is Steadier Than It Used to Be

Article excerpt

America's economy has become boring. It is less volatile, has fewer ups and downs. No recession on the horizon.

Unemployment for months has been running about 5.3 percent. Inflation hovers at about 3 percent. Gross domestic product (GDP), in real terms, grew 2 percent in 1995, 2.3 percent last year, and economists expect roughly the same increase in the national output of goods and services this year.

"We have got boring {government economic} policy, which is giving us a stable economy," says Roger Brinner, chief economist at DRI/McGraw-Hill in Lexington, Mass. That contrasts with "a history of activist fiscal and monetary policy." There have been no recent "grand experiments" in budget policies, such as the huge tax cut and military buildup in the early Reagan presidential years, or the surge in Vietnam war spending in the late 1960s. Monetary policy has been relatively steady under Federal Reserve chairman Alan Greenspan, not jumping from "highly stimulative," as it was when G. William Miller was Fed chairman in the late 1970s, to "real tough," as when Paul Volcker took over in 1979. Nor have there been any major outside "shocks" to the economy, such as the quadrupling of oil prices by the OPEC cartel in 1973-74. "We haven't had any of that since the victory over Iraq in 1991," Dr. Brinner says. So for six years, there have been neither dramatic policy changes nor major economic shocks. "With the wavemakers gone, it is no wonder the waves have died down," he says. Gary Bigg, an economist at Prudential Economics in Newark, N.J., says even the stock market is less volatile. Between 1947 and 1988, he notes, the monthly change (standard deviation) in prices for the Standard & Poor's 500 stock index was 3.3 percent. Since 1988, it has been 2.5 percent. Like Brinner, Mr. Bigg sees a "consistent" Fed monetary policy helping to stabilize interest rates and inflation. One result has been that business for interest-rate-sensitive industries - residential spending, equipment investment, and consumer durables (refrigerators, automobiles) - has varied less. …

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