Greenspan Sees Economy and Job Growth Gaining Momentum
Greenspan said a number of factors are contributing to economic and employment momentum, including consumer spending and corporate capital investment. "The capital gains on 401(k)s is $600 billion," Greenspan said on ABC's This Week. "When we saw money evaporating in those particular accounts, people pulled back their consumption. They're now moving forward in a more positive direction."
The former Fed chief added that although capital investment is still depressed for real estate, corporate spending on new equipment is "coming back in a fairly substantial way." Most important, Greenspan said, is a massive and under-appreciated snap-back in inventory replenishment from in-the-basement levels.
A Double Dip Is Less Likely Now
"[Purchasing managers] are going to have to build inventories to protect their product lines at an ever increasing pace, and that is a self-reinforcing cycle," Greenspan said. Gross domestic product rose at a robust 5.7% pace in the final quarter of 2009 thanks largely to a build-up in inventories. Greenspan added that the threat of a double-dip recession has "fallen significantly in the last two months."
The former Fed chairman's remarks came after last week's Labor Department report, which showed that March was a fairly good month for employment growth after all, as the economy added 162,000 nonfarm payroll jobs. That was a substantial improvement over February, when the nation lost 14,000 jobs.
Although it wasn't the first month since the recession began that the nation has added jobs -- small gains were made in November 2009 and January 2010 -- it was the biggest U.S. employment rise since March 2007, when the economy added 239,000 jobs. The unemployment rate remained unchanged at 9.7%.