Employment is up, she noted, while inflation is down. But worker shortages could raise wages and prompt inflation, while consumer sales have slowed somewhat in recent months. She said consumer sales were so high to begin with, though, that even with a slowdown, they are strong. The low unemployment rate reflects the rapid expansion of employees on American payrolls in 1997. Also remaining solid, she said, are manufacturing and production.
Retail sales are also brisk.
Automobile sales, for example, finished 1997 selling at a 15 million unit rate annually. One factor that could serve as a drag on the economy, Phillips said, is the meager buildup of undesired inventory, which has prompted many businesses to stockpile in anticipation of sales. At some point, we will begin to see a slowdown. There's not much of a problem if people can meet their payments. As long as people are working, it doesn't cause a problem, but it does constrain their ability to buy big-ticket items.