Labor Markets In The New Economy

Nothing wrong with insurance. That's what Federal Reserve Chairman Alan Greenspan took out when he raised short-term interest rates 25 basis points, bringing them back to their pre-1998 Asian financial crisis levels. After all, economic growth is surging ahead at a blistering 4% annually, for the fourth year in a row. Probably too fast. What's troublesome about the tightening move is its justification--what the Fed described as the inevitable inflationary consequences of a shrinking pool of available workers--and the echoes that has with past economic orthodoxy. The Fed is using certain measures of labor availability to determine the speed limit of growth. But like so many other factors in the New Economy, it may be those measures are no longer reliable.

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