By Evelina M. Tainer, Chief Economist, Econoday
1/14/02

Fed chairman Alan Greenspan spoke to the Bay Area Council Conference on Friday with a decidedly upbeat tone. If he were just a regular Wall Street economist, the speech would probably have gone unnoticed in that it was a summation of activity since September 11 and ended with some brief remarks about good long- term prospects with significant short-term risks. On the whole, Greenspan believes that productivity might have taken a hit after September 11, but it would be a short-term issue that will be easily resolved. He sees signs of stabilization in the economy but still feels that investment spending and profits have been weak and that household spending would be dampened by a backup in interest rates and rising unemployment. As a result, bond markets rallied on his remarks while equity prices fell modestly. They did recover to pre-speech levels within a few minutes.