for a few years now. almost certainly, it reflects a number of factors, including the sharp deceleration in health care costs and the heightened pressure on firms and workers in industries that compete internationally. domestic deregulation has also intensified the competitive forces in some industries. but, as i outlined in some detail in testimony last month, i believe that job insecurity has played the dominant role. for example, in 1991, at the bottom of the recession, a survey of workers at large firms by international survey research corporation indicated that 25 percent feared being laid off. in 1996, despite the sharply lower unemployment rate and the tighter labor market, the same survey organization found that 46 percent were fearful of a job layoff. whatever the reasons for its persistence, job insecurity cannot suppress wage growth indefinitely. clearly, there is a limit to how long workers will remain willing to accept smaller increases in living standards in exchange for additional job security. even if real wages were to remain permanently on a lower upward track than otherwise as a result of the greater sense of insecurity, the rate of change of wages would revert at some point to a normal relationship with price inflation. the unknown is when a more normal pattern will resume. indeed, the labor markets bear especially careful watching for signs that such a process is under way. so far this year, the demand for labor has stayed strong. payroll employment grew briskly in january and february, and the unemployment rate remained around 5¼ percent - - roughly matching the low of the last cyclical upswing, in the late 1980s. also, initial claims for unemployment insurance remained low into march. in addition, the percentage of households telling the conference board that jobs are plentiful has risen sharply of late, which suggests that workers may be growing more confident about the job situation. finally, wages rose faster in 1996 than in 1995 by most measures - - in fact, the acceleration was quite sizable by some measures. this, too, raises questions about whether the transitional period of unusually slow wage gains may be drawing to a close. in any event, further increases in labor utilization rates would heighten the risk of additional upward pressure on wage costs, and ultimately prices. to be sure, the pickup in wage gains to date has not shown through to underlying price inflation. increases in the core cpi, as well as in several other broad measures of prices, have stayed subdued or even edged off further of late. as best i can judge, faster productivity growth

mr. greenspan highlights some key aspects of the current economic situation in the united states testimony of the chairman of the board of the us federal reserve system, mr. alan greenspan, before the joint economic committee of the united states congress on 20 / 3 / 97. mr. chairman and members of the committee, i am pleased to appear here today. last month, the federal reserve board submitted its semiannual report on monetary policy to the congress. that report and my accompanying testimony covered in detail our assessment of the outlook for the u. s. economy. this morning, i would like to highlight some of the key aspects of the current economic situation. as i told the congress last month, the performance of the u. s. economy remains quite favorable. real gdp growth picked up to more than 3 percent over the four quarters of 1996. moreover, recently released data suggest that activity has retained a great deal of vigor in early 1997. in addition, nominal hourly wages and salaries have risen faster than prices over the past several quarters, meaning that workers have reaped some of the benefits of rising productivity and thus gained ground in real terms. outside the food and energy sectors, increases in consumer prices have actually continued to edge lower, with core cpi inflation of only 2½ percent over the past twelve months. the low inflation of the past year is both a symptom and a cause of the good economy. it is symptomatic of the balance and solidity of the expansion and the evident absence of major strains on resources. at the same time, continued low levels of inflation and inflation expectations have been a key support for healthy economic performance. they have helped to create a financial and economic environment conducive to strong capital spending and longer - range planning generally, and so to sustained economic expansion. these types of results are why we stressed in our monetary policy testimony the importance of acting promptly - ideally pre - emptively - - to keep inflation low over the intermediate term and to promote price stability over time. for some, the benign inflation outcome of the past year might be considered surprising, as resource utilization rates - - particularly of labor - - have been in the neighborhood of those that historically have been associated with building inflation pressures. to be sure, nominal hourly labor compensation, especially its wage component, accelerated in 1996. but the rate of pay increase still was markedly less than historical relationships with labor market conditions would have predicted. atypical restraint on compensation increases has been evident