According to DeLong, business spending on information technology jumped to an annual rate of 26 percent in the first quarter of 1999, compared to a 9 percent in the same quarter of 1998. Technological advances include not merely new production techniques but also new managerial methods and new forms for business organization. Generally, technology is linked with the discovery of new knowledge, which permits firms to combine a specific amount of resources in new ways to achieve a greater output. Another aspect of productivity is the increase in labor. When labor has increased along with the quality of work, causes productivity to increase, which cause the cost of production to decrease, which stabilizes inflation.
Economists believe that high profits are due to increasing the productivity of workers.
Also they are shifting work to lower-cost geographic areas. Personnel costs are being controlled by investments in high-tech production methods. Labor productivity rises sharply as firms expand output without having to expand labor hours proportionately. Furthermore, overtime hours tend to increase first, with additional employment coming only later, as confidence in the expansion deepens. Output gets an added boost from the need to restock inventories and increase redistribution lines.