Tags: Alan Greenspan | Economy | Productivity Slump | America

Greenspan: US Economy 'Not Strong' Amid Productivity Slump

By    |   Friday, 27 February 2015 01:03 PM

Former Federal Reserve Chairman Alan Greenspan isn't impressed with the state of the U.S. economy.

The government Friday revised fourth-quarter GDP growth down to 2.2 percent from 2.6 percent. Growth for all of 2014 totaled 2.4 percent, the fastest pace since 2010.

The economy is "not strong," Greenspan told CNBC. While the jobs market is strong, "we're getting evidence of weakened productivity," he said. "That is a key statistic which tells how the economy is functioning."

Productivity dropped an annualized 1.8 percent in the fourth quarter.

In addition, heavy government entitlements are crowding out savings, which in turn is crowding out capital investment, Greenspan said.

"Capital investment is key to productivity growth. That has slowed down quite dramatically, and productivity has followed right along."

On the global stage, meanwhile, demand is exceedingly weak, Greenspan said.

"The way I measure it, it's probably tantamount to what we saw in the later stages of the Great Depression. It's not anywhere near what the problems were back then but we haven't seen anything like that since then."

Japan's economy shrank in two quarters last year, and the eurozone economy grew only 0.9 percent.

Gallup's U.S. Economic Confidence Index backs up the former Fed Chairman. It dipped to an average of negative 2 for the week ended Feb. 22, down from positive 3 the prior week. A 27 percent total of Americans said the economy was "excellent" or "good," while 29 percent said it was "poor." That produced the negative 2 total.

This is the first sub-zero reading for the index since late December. Prior to that, the index was consistently in negative territory since Gallup began tracking it daily in 2008.

"It is not clear what is behind last week's decline in confidence, although quickly rising gas prices last week may have played a role, given that the drop in gas prices coincided with the rise in confidence in late 2014," writes Gallup's Rebecca Riffkin.

Gas prices rose 3.9 percent in the last week to $2.37 a gallon.

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Former Federal Reserve Chairman Alan Greenspan isn't impressed with the state of the U.S. economy.
Alan Greenspan, Economy, Productivity Slump, America
Friday, 27 February 2015 01:03 PM
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