WASHINGTON - Federal Reserve Board Governor Susan M. Phillips said Friday that improved productivity, high levels of savings and investment, and price stability will lead to long-term economic growth.
"Not all the ingredients are accomplished at this point, but significant progress has been made," Ms. Phillips said. "I believe that we will begin seeing more clearly the results of those gains in measures of macroeconomic performance as we move on through the remainder of this decade and into the 21st century."
Ms. Phillips also said the Fed must continue to fight inflation. "We have gotten much of the sand out of the gears, but it's not yet all gone," she said.
Ms. Phillips, speaking at the Economics Education Winter Institute in St. Cloud, Minn., spent most of her speech outlining her views on recent developments that will effect business cycles.
The computer revolution ranks as one of the most important of these developments, she said. Computers are eliminating jobs that were once considered essential, replacing them with different opportunities.
"A great deal of churning thus is taking place in the labor markets," she said. "The ability of workers to retool - midway through their careers - is becoming more and more essential. To stand still with yesterday's skills is a strategy that is sure to lose ground."
Changing corporate structures, many of which rely less on middle managers, also are effecting the economy, she said.
"Organizational structures are being redrawn in all sorts of ways in an effort to find combinations in which individuals can work together most efficiently," Ms. Phillips said. "In the short run, these changes have been tough on many workers. But, in the long run, a stronger economy will result."
Finally, she said the nature of the work force also has changed, with firms preferring to hire more short-term and temporary employees.
"Evidently in a world marked by rapid change, many firms have continued to be attracted by the greater flexibility that comes with the hiring of workers on a temporary basis," she said.