Word: wyss
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...that there is anything so bad about even 3%, Wyss points out: "Three percent in the '80s would have been a boom." Blinder is also impressed by how much better the economy is performing than anyone would have thought possible even a few years ago. Today's Fed, he proposed, is engaged in an experiment to see if the unemployment rate can be held permanently at around today's low 4.1% without triggering rapid inflation. The test may or may not work, says Blinder--but if he or Lindsey had suggested that the idea was even worth an experiment when...
...fact, TIME's board expects the experiment to succeed. The Fed, says Wyss, is about to pull off something never before achieved: piloting the economy to two "soft landings" in a row. The previous one was in 1995-96, when a series of earlier interest-rate increases by the Fed succeeded in draining away inflationary pressure while letting growth continue...
...Wyss figures the economy is slowing enough to reduce the "core rate" of inflation--the underlying trend, minus usually volatile food and energy prices--to about 2.5% a year. That is believed to be just about Fed Chairman Alan Greenspan's target. Result: after about a year of "below-trend" growth, output could be able to speed up again. Wyss figures the economy has the potential to grow almost 4% annually over the next 10 years...
...biggest reason for increasing productivity, Feldstein says, is, of course, the computer and particularly the Internet. Wyss cites a little-noticed benefit: with computers, managers "can get a high school graduate to do the work a college graduate used to do." One example: a mortgage-loan applicant was once interviewed by "a trained loan officer with a college degree" who probably referred the application to a loan committee, which might have given an answer in two weeks. Today "you'd be sitting across the desk from somebody who was probably a teller two weeks ago, and she's reading...
...result is that unemployment has recently dropped most sharply among less educated people. And, says Wyss, "by creating jobs for lower-skilled people, you have changed the basic way income is distributed." From 1973 to 1993, he notes, only the top-earning 20% of the population received any gain at all in real income, but "in the past five years the bottom 20% had the highest income gains" of any group...