WASHINGTON -- Federal Reserve chairman Alan Greenspan said the country can be confident that a flexible U.S. economy will be able to replace jobs lost in the last recession but said laid-off employees in job-losing industries may need to be retrained to qualify for new work.
In a speech prepared for an economic conference in London, Greenspan sought to address fears that many of the 2.8 million manufacturing jobs lost in the past 3 1/2 years could be gone forever to lower wage countries.
He said competition from low-wage countries was not a new development, citing that in the 1950s and 1960s, the concern was that U.S. jobs were migrating to Japan with fears about competition from Mexico rising in the 1990s. He said more recently the concern has been that we are losing jobs to China.
Greenspan said what people needed to keep in mind is that the U.S. economy has always been able to generate enough jobs in cutting-edge industries to replace jobs lost in industries facing the highest competition from low-wage labor. This has given the country an average of 94 percent employment of its work force, he said, predicting that this process will continue.
"We can thus be confident that new jobs will replace old ones as they always have, but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process," Green-span said.
He warned U.S. policy-makers worried about the loss of jobs not to heed calls for an increase in protectionist trade barriers, saying such a move could be "unexpectedly destabilizing" to the global economy.
"I remain optimistic that we and our global trading partners will shun that path," he said. "The evidence is simply too compelling that our mutual interests are best served by promoting the free flow of goods and services among our increasingly flexible and dynamic market econ-omies."