As I suggested yesterday, my guess about future economic conditions is very close to the Board staff’s forecast. I’m just a little more optimistic than they are on real growth and unemployment. So, Don, I may be your guy! [Laughter] The economy appears to be in the sweet spot of strong growth combined with very low inflation. It would be even sweeter if it were accompanied by rapidly falling unemployment. I believe that we are going to get a decline in unemployment soon, as does the Greenbook. But like Cathy, I’ll feel better about it when I start seeing it. The productivity improvements in manufacturing seem to be spreading to the wholesale and retail trade sectors, where information technology advances have improved the economies of scale in retailing, leading to below-par hiring in that sector. I’m a lagging indicator when it comes to using new technology, but I recently got up enough nerve to use the self checkout counter at the supermarket. [Laughter] It was very scary. The bar code was a tremendous productivity enhancer, and now we have the bar code without the employee— with the customer using the bar code. I understand that Wal-Mart is pushing technology that is going to make the bar code obsolete, which will be even more of a miracle. I think that, in addition to technology, freer trade and outsourcing are also contributing to faster productivity growth.
Turning to the Eleventh District, I can say with a lot more conviction than I did at our last meeting that the Texas economy is well on its way to recovery. On the basis of revised and more-complete data, we feel more confident that our economy has entered a sustained period of growth. And it now appears that our employment growth slightly outpaced the average in the nation rather than coming in slightly behind it, as we had thought recently. The improved performance is occurring across a widening range of sectors. Since the middle of 2003, construction activity has been contributing to the District’s recovery. Single-family building permits and residential contract values took off in mid-2003 and remain at record levels. The Mexican economy seems to be doing a little better, too, which is helping our District. Domestic drilling has not responded much to higher oil and natural gas prices, so we haven’t gotten a boost there. But gas drilling activity is anticipated to pick up this year. Output has stabilized in Texas manufacturing. The Texas leading index continues to indicate improved growth in the months ahead. Broadly speaking, the District’s recovery is under way on a par with the Greenbook outlook for the nation.