It was easy, too. All they had to do was lower expectations far below anything you would have dared to imagine in your worst nightmares a year ago. And unfortunately we're all out of those just now. This is code blue in the boiler room, folks. Accelerated productivity has been elevating standards of living, and it has been containing cost and price pressures, even as the economy operates at unusually high levels of labor resource utilization.
Productivity only has three sources.
It can come from the natural economies of scale that occur when an economy expands in scope, for example by an increase in international trade that allows workers of different nations to specialize in what they do best. And it can come from workers becoming more skilled and experienced. But predominantly it comes from investments in capital equipment that allow people to produce more output with the same amount of labor. Greenspan, to his credit, saw the drop in productivity coming. And as Greenspan has so often pointed out, in the New Economy the capital spending that counts is spending in information technology.