mr. greenspan's testimony before the joint economic committee of the us congress testimony by the chairman of the board of the us federal reserve system, mr. alan greenspan, before the joint economic committee of the us congress in washington dc on 29 / 10 / 97. we meet against the background of considerable turbulence in world financial markets, and i shall address the bulk of my remarks to those circumstances. we need to assess these developments against the backdrop of a continuing impressive performance of the american economy in recent months. growth appears to have remained robust and inflation low, and even falling, despite an ever tightening labor market. our economy has enjoyed a lengthy period of good economic growth, linked, not coincidentally, to damped inflation. the federal reserve is dedicated to contributing as best it can to prolonging this performance, and we will be watching economic and financial market developments closely and evaluating their implications. even after the sharp rebound around the world in the past twenty - four hours, declines in stock markets in the united states and elsewhere have left investors less wealthy than they were a week ago and businesses facing higher equity cost of capital. yet, provided the decline in financial markets does not cumulate, it is quite conceivable that a few years hence we will look back at this episode, as we now look back at the 1987 crash, as a salutary event in terms of its implications for the macroeconomy. the 1987 crash occurred at a time when the american economy was operating with a significant degree of inflationary excess that the fall in market values arguably neutralized. today ’ s economy, as i have been suggesting of late, has been drawing down unused labor resources at an unsustainable pace, spurred, in part, by a substantial wealth effect on demand. the market ’ s net retrenchment of recent days will tend to damp that impetus, a development that should help to prolong our six - and - a - half - year business expansion. as i have testified previously, much of the stock price gain since early 1995 seems to have reflected upward revisions of long - term earnings expectations, which were implying a continuing indefinite rise in profit margins from already high levels. i suspect we are experiencing some scaling back of the projected gains in foreign affiliate earnings, and investors probably also are revisiting expectations of domestic earnings growth. still, the foundation for good business performance remains solid. indeed, data on our national economy in recent months are beginning to support the notion

the effects they will have going forward. as an economist looking at these issues on a microlevel, i appreciate the expertise on display at this conference. from my new perch as a fed governor taking the macro view, the research presented gives more context to the wider economic playing field. from either perspective, the technology - enabled responses and the changes brought about by the pandemic itself are important issues for policymakers to understand. they affect how we look at the economy overall. as i look ahead, i am considering how those changes affect the outlook, and i would like to speak a bit about how i see the economy evolving as we move forward. outlook 2 / 4 bis - the labor market remains strong, as can be seen across a variety of measures, from the low unemployment rate to the high quits rate, which illustrates the confidence of workers who are willing to leave their jobs in pursuit of better ones. labor force participation remains lower than it was prior to the pandemic, reflecting several factors, including people who left the workforce for early retirement and some remaining parents and other caregivers who stayed home through the pandemic. these are not factors that reverse on a dime. with still - strong labor demand and sluggish labor supply, the job market remains very tight. workers are moving between jobs more rapidly than in the past, putting upward pressure on wages. in a market with more job openings than workers, the competition to fill vacancies is leading to rapid wage gains now, and the resulting salary compression may lead to further upward wage pressures in the future. as growth has slowed this year, supplya€ “ demand conditions in the labor market - and the overall economy - seem likely to ease some. we have already seen some indications from survey data, information from transportation hubs, and producer prices that supply bottlenecks have, at long last, begun to resolve. nonetheless, inflation remains elevated, and this is the problem that concerns me most. inflation creates economic burdens for households and businesses, and everyone feels its effects. it can also change people's expectations about how long lasting price rises will be. those inflation expectations can become entrenched and, in doing so, increase the likelihood that high inflation will persist. while oil and gasoline prices have come down in recent months, i am concerned that fluctuations in prices of the goods to which people pay the most attention, like food and housing, will affect expectations of future inflation. thankfully, longer -