The drop in unemployment indicates that many industries are learning more efficient ways to accomplish their missions. But it also indicates that we may be approaching the peak of our national industrial production capability, Phillips said. But wages are starting to rise as the labor market becomes more of a seller's market, she said. Wage increases have so far remained moderate because the rise in the cost of benefits has been low. The labor shortage hasn't hurt industrial output or the cost of capital, Phillips said.
Inflation is virtually non-existent.
She said the core index, which does not consider economically volatile goods such as food or energy, stood at only 2.2 percent in 1997. Phillips predicted continued growth and low inflation in 1998. But she worries about the effect of weak Asian markets, particularly those in South Korea, Thailand and Indonesia, on American trade, in which imports already outnumber exports. She said continued economic woes in the once-robust Asian market could slow imports and impede the ability of the United States to compete abroad.