The U.S. economy is "going very well," with no signs yet of "extraordinary" wage increases, Federal Reserve Vice Chairman Alice Rivlin said Thursday.
"Wage increases have been quite moderate in this expansion, considering that labor markets are very tight in this country," Ms. Rivlin said in an interview on CNBC. She added that no one at the Fed wants to stop growth if they don't have to. "Nobody wants to take the punch bowl away, and nobody wants to slow down the economy unnecessarily," she said.
Asked about Fed Chairman Alan Greenspan's inflation warning in Capitol Hill testimony yesterday, Ms. Rivlin said Fed officials seem to be "thinking aloud" about the U.S. expansion, now in its seventh year.
Yesterday, Mr. Greenspan suggested that the low U.S. unemployment rate may push wages and prices higher and that U.S. stocks could be overvalued.
"Job growth slowed significantly in August and September, but it did not slow enough," Mr. Greenspan said in testimony to the House Budget Committee. "Thus the performance of the labor markets this year suggests the economy has been on an unsustainable track."
Ms. Rivlin said U.S. job creation "seemed to slow down a bit" recently. The economy added a smaller-than-expected 215,000 new jobs in September.
That number looks deceptively large, because once workers who returned from the August strike against United Parcel Service of America Inc. are excluded from the government's estimate, the economy added 55,000 to 60,000 jobs last month. That's the second consecutive month of weaker-than- expected job growth.
Ms. Rivlin sits on the central bank's Federal Open Market Committee, which sets interest rates.
The committee voted to leave the overnight bank lending rate target unchanged at 5.50% at its most recent meeting on Sept. 30. Fed policymakers meet again Nov. 12.
Ms. Rivlin said Fed officials have been"surprised the economy is working so well" and will continue to watch "all the signs" for trouble.
The Fed wants the economy to expand at the "highest possible sustainable" rate, though it remains unclear if the current rate of growth is sustainable, she said.
The economy grew at a 4.1% annual rate through the first half of the year. That's above the 2% to 2.5% rate Fed officials have identified as the top rate that wouldn't bring accelerated inflation.
Turning to recent gains in the U.S. stock market, Ms. Rivlin said it remains an issue the Fed will watch. "The question for the future is, are prices outrunning earning prospects?" she said.
