White House adviser sees resilient economy
CHICAGO (Reuters) - White House economic adviser Edward Lazear said on Friday that the U.S. economy is not out of the woods but has been "amazingly resilient" so far in the face of tighter credit standards.
"The economy has not yet suffered in a meaningful way" from the credit crisis that blew up in mid-August. Lazear told reporters after a speech at a Chicago Federal Reserve conference on labor mobility.
At the same time, high energy prices have been a drag on growth and will likely continue to be, with a disproportionate impact on low-income Americans, Lazear said.
"There is no doubt that high gas prices have had an impact on the economy. We would have had higher growth rates" otherwise, he said.
Still, the underlying strength in the U.S. economy, including a low unemployment rate, should offset the impact of high energy prices to some extent, Lazear said.
Like other forecasters, Lazear said that U.S. growth in the current quarter looks soft after a stronger-than-expected outcome for Q3.
"By Q1 or Q2 of 2008 things should pick back up," he said, adding that between the credit situation and energy prices there is still a "vulnerability."
In his prepared remarks, Lazear said the United States' ability to attract capital from abroad is key to ensuring sufficient funds for labor productivity and wage growth.
"There are some signs that things may be slowing down on this front," he said.
The recent declining trade deficit means that investment in the United States from abroad is also declining, Lazear said.
"As long as such reversals are gradual, most economists believe that the adjustment is not problematic and potentially even healthy. Right now that seems to be the path that we are on," he said.
President George Bush's economic guru warned against protectionist sentiment in Congress, and urged lawmakers to finalize approval of free trade agreements with Peru, Colombia, Panama and South Korea.
"These are valuable agreements, not only from an economic point of view, but also from a geopolitical point of view," he said.
(Reporting by Ros Krasny, Editing by Chizu Nomiyama)
