Greenspan sees no evidence of slowdown in productivity surge

JACKSON, Wyo. -- Federal Reserve Chairman Alan Greenspan said Friday that he sees no "credible evidence" that the powerful acceleration of U.S. productivity growth in recent years has stopped.

Greenspan, speaking at an economic conference here, stressed that the gains in productivity -- the amount of goods and services produced for each hour worked -- are not just the result of strong economic growth.

Rather, he said, "The most recent wave of technology has engendered a pronounced rise in American rates of return on high-tech investments, which has led to a stepped-up pace of capital (spending) and increased productivity growth."

The surge in productivity has allowed the U.S. economy to grow at a much faster rate in recent years than most economists thought possible without triggering a new round of inflation.

For instance, the Commerce Department reported Friday morning that the gross domestic product -- the total value of all goods and services produced in the country -- increased at a 5.3 percent annual rate in the April-June period. That was a slight upward revision from an earlier estimate, and it meant that in the 12 months ended in June, the economy grew an extraordinary 6 percent after adjustment for inflation.

Greenspan made his remarks at a conference on global economic integration, sponsored by the Kansas City Federal Reserve Bank.

The Fed chairman noted that productivity, which is the ultimate source of increases in standards of living, hasn't grown nearly as rapidly recently in other industrial nations. He attributed this in part to government policies in those countries that prevent businesses from taking full advantage of opportunities to reduce costs -- such as rules in many European nations that strongly discourage laying off workers.

"It has become generally understood that governmental actions often hinder incentives to investment by increasing uncertainties, boosting risk premiums, and raising costs," Greenspan said. "A recent manifestation of these costs can be seen in the lower level of high-tech capital investment in continental Europe, on average, and in Japan, relative to that in the United States."

In sharp contrast, and "counterintuitively, the increased ease of layoffs in the United States, by reducing the risks of hiring by American employers, has contributed to a higher rate of employment in the United States compared with the vast majority of our major trading partners," he said.