Lawrence Summers, the Harvard professor and former Obama administration official who is reported to have emerged as a front-runner to lead the Federal Reserve, on Wednesday spoke about technological change that could lead to increased unemployment over the next decade, but steered clear of any speculation about his future.
Addressing a conference of economists in Cambridge, Summers, who has generated his share of controversy during his career, tried to avoid any on Wednesday. And that wasn’t a surprise, said Jeffrey Smith, an economics professor at the University of Michigan.
“It was a speech of somebody who understood he’s at risk of being the Fed chairman,” Smith said.
Summers is a former Harvard University president who served as President Obama’s top economic adviser early in the administration and Treasury secretary under President Clinton. He has emerged in several media reports recently as a leading candidate to succeed Federal Reserve chairman Ben Bernanke, whose term expires in January.
Obama is said to be considering either Summers or Janet Yellen, the Fed’s vice chairwoman, as Bernanke’s successor.
Summers spoke at a conference sponsored by the National Bureau of Economic Research, a Cambridge organization of leading academic economists known for dating US recessions. He warned that rapid changes in information technology are disrupting job and wage growth for many Americans. And that the share of working age adults who are employed may continue to decline in the next decade.
Manufacturers are seeing a decline in relative employment, Summers told the economists at the Royal Sonesta Hotel in Cambridge. Companies like Google, Netflix, Amazon, and other service providers, including those in the health care sector, are becoming more important. The service sector is likely to account for a growing share of employment, but also require education and skills that many workers may not have.
He said he didn’t necessarily have all the solutions to these structural economic problems, but stressed that improving educational quality was an important factor.
In private discussions after the speech, economists couldn’t avoid chatting about Summers’s future, said Erik Brynjolfsson, the author of book on the digital revolution’s transformation of the economy and employment.
Brynjolfsson, a professor at MIT’s Sloan School of Management, said Summers is well respected and would be a good leader for the country’s central bank.
Summers has raised some concerns that the historically low interest rates and other extraordinary measures that the Fed has employed in recent years to stimulate the economy could create new financial bubbles in the economy.
The Fed has maintained its key short-term interest rate at near zero since the end of 2008. It has also been buying $85 billion a month of Treasury- and mortgage-backed securities as a way to hold down long-term rates, such as mortgages.
The Fed has indicated that it wants to gradually end that program, but the markets haven’t responded well to that prospect as investors have feared that the economy isn’t strong enough to stand on its own.
Summers has some vocal critics, and many have raised questions about whether he would be right choice to guide the country’s monetary policy and implement a financial overhaul.
Summers developed close relationship with members of the Obama administration, with whom he worked during the financial crisis in 2009. And some analysts believe that the president may be more comfortable working with Summers.
Summers is also seen as close to Wall Street, and some analysts have questioned whether he would be the best regulator of financial institutions.
During his tenure in the Treasury Department, Congress repealed the Glass-Steagall Act, which further deregulated the financial industry. Some critics say that led to “too big to fail” banks and contributed to the recent banking crisis.
Paul Edelstein, an economist with IHS Global Insight, said Summers should be on the shortlist for the central bank post, but then should eventually be dropped.
The Fed chairman needs to be a good communicator and a consensus builder, skills that aren’t thought to be Summers’s strong suits, Edelstein said.