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Chicago Fed Letter, No. 126, February 1998
Where Have All the Workers Gone?— A Summary of the 1998 Economic Outlook Symposium

In 1997, the economy expanded with gusto in the first quarter, rising by nearly 5%, and then moderated in the second and third quarters, gaining 3.3% and 3.5%, respectively. Observers feared that such high growth was unsustainable without causing the economy to overheat and inflation to rise. However, the year witnessed a downward trend in both the unemployment rate and inflation. Still, the lag structure between strong economic growth and inflation is not clearly defined and concern about inflation remained even as the inflation rate dipped below 2%, its lowest level in over ten years. The Asian economic crisis in October led to increased stock market volatility, strengthened the dollar, and added a new wrinkle to the U.S. economic horizon.

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