Greenspan Says ‘Momentum Building Up’ in U.S. Economy

Greenspan Says ‘Momentum Building Up’ in U.S. Economy

April 4 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said there is “a momentum building up” in the U.S. economy and the odds of it faltering have “fallen very significantly.”

“There is a momentum building up which is really just beginning and it’s got a way to go,” Greenspan said today on ABC’s “This Week” program. He said the U.S. is “on the edge of a significant build-up” in inventories “and that is a self- reinforcing cycle.”

The former Fed chairman said the chances the economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.”

Obama administration officials including White House economic adviser Lawrence Summers said on ABC’s “This Week” program, that job creation “will accelerate.”

Employment grew in March by the most in three years, the Labor Department said on April 2. Payrolls increased by 162,000, the third gain in the past five months and the most since March 2007. The gain included 48,000 temporary workers hired by the government to conduct the census.

Manufacturers, health-care companies, temporary-help service providers and warehouses were among those adding jobs in a sign the expansion is broadening.

The economy will also get a lift as companies begin buying equipment and materials, Greenspan said.

Executives “are saying effectively that there’s a shortage of inventories out there and we’re on the edge of a significant build-up,” he said.

Housing Weakness

The economic rebound is not without its pockets of weakness. Housing is “still depressed,” Greenspan said, though the bubble in the commercial real estate has “already popped. If we were going to get severe secondary reactions, they would have already occurred.”

Greenspan also said he was concerned about the accuracy of the Congressional Budget Office’s estimate that the recently passed health-care legislation will cut $143 billion from the deficit over 10 years.

“The probability” that figure is wrong “is much higher than we would like,” he said.

Greenspan also responded to an editorial in the New York Times today written by Michael Burry, a hedge-fund manager who was among the first to bet on subprime housing market defaults.

Greenspan said that it is possible Burry is part of “an extremely small group” of economists and investors who is “really exceptionally adroit” at forecasting.

In the article, Burry took issue with Greenspan saying last month on Bloomberg Television’s “Political Capital With Al Hunt” that the success Burry and others had in predicting the economic collapse was a “statistical illusion.”

Burry said Greenspan and others at the Fed should have seen the crisis building.

source: bloomberg.com