NCPA - National Center for Policy Analysis

Economic Future Is Bright

March 20, 1997

Some economists contend that the U. S. entered an extended period of economic growth in the fourth quarter of 1996, during which we will see real wages rise and workers' standards of living increase -- all in an environment of low inflation.

  • In the fourth quarter of 1996, economic growth accelerated to an estimated 3.9 percent annual rate -- bringing the increase in gross domestic product for the entire year to 2.4 percent.
  • For the entire year, prices rose only 1.8 percent -- the lowest year since 1964.
  • Fifteen years of corporate restructuring, downsizing and investing in technology have begun to pay off just as this period of adjustment winds down -- implying a much more stable workplace for the foreseeable future.
  • Steady growth and low inflation have characterized the U. S. economy throughout most of its history -- with aberrations occurring only during periods of instability such as the Great Depression and the 1970s.

Economists warn that none of this precludes future short-term shocks or stock market corrections. But they believe such disturbances will occur within a long-term positive economic environment as fewer old jobs are lost as new jobs are created.

Finally, contrary to popular belief, higher prices don't necessarily cause inflation; they are a consequence of inflation. However rising wages may also just be a sign of workers' higher standard of living.

Source: Charles W. Kadlec (J. & W. Seligman & Co.), "An Era of Growth and Stability," Wall Street Journal, March 20, 1997.


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