There is little doubt that some things about the economy really have changed. For one thing, in an information economy, many products actually get cheaper as they get better, computers and telecommunications being epic case in point. The more the economy is rooted in information technology, the greater the tendency for price cuts. For another thing, deregulation and globalization have increased price competition. Further, in a globalized and deregulated economy, labor has lost bargaining power.
Unemployment rates are well below five percent, but wage increases have been modest.
Productivity is dramatically up, an astonishing four percent per year during the last two quarters, and is outpacing labor costs. All of these elements are genuinely new. For example, the prices of raw materials have been unusually low. But that may not go on forever. In addition, the strong U.S. economy has produced a relatively strong dollar, which means prices of imports stay low.