Guynn expressed disappointment, however, that the agreement failed to address Social Security or Medicare. We ought to take the entitlement medicine now, while our healthy economy can help us stomach the resulting political indigestion. It didn't happen last year, however. Income growth, tight labor markets, low interest rates and a healthy economy encouraged consumers to spend more. Business investment also played an important role in the economy's growth last year, Guynn said.
Businesses usually invest heavily in the early years of an economic expansion.
The current expansion began in the second quarter of 1991. Businesses substituted capital for labor, which is exactly what you would expect in a tight labor market. Guynn predicted a good year for 1998 but tempered his outlook with caution about consumer debt and continued tight labor markets. As for labor, he noted that the limited supply of workers will continue to be a challenge for business.