What's in a number? If it's the latest statistic on productivity, plenty. As the U.S. economic expansion progresses through its seventh year--with scarcely a sign of inflation--a growing chorus of economists and business leaders, including Federal Reserve Chairman Alan Greenspan, have concluded that the key to this scenario is increased productivity. Published productivity numbers have not supported the case for the New Economy--in which heavy investments in technology and other factors yield strong growth, low unemployment, and scant inflation.
But the latest numbers indicate a jump in productivity gains--to a 2.5% annual rate. Do they confirm the New Economy? Or are they, like past productivity gains, simply by-products of the business cycle that will disappear when growth slows? Here, James C. Cooper, Senior Economist/Business Outlook Editor, and Michael J. Mandel, Economics Editor, offer their interpretations.