It was said that once-in-a-century advances in technology are transforming our economy. The computer chip is doing for today's knowledge economy what electricity did for our industrial economy a century ago. Synergies in technology are driving acceleration in productivity growth that enables us to grow faster with less inflation. Economic progress is speeding up; the speed limit is rising. "Real GDP growth has averaged 4 percent for the past four years, with declining inflation. This almost doubles the 2 percent to 2.
5 percent not long ago considered the maximum noninflationary potential. But we " ve been growing faster than potential and sustaining the unsustainable for four years and counting. Sounds odd, doesn't it? Our faster output growth is based primarily on faster productivity growth and secondarily on faster labor force growth." Productivity growth now appears to be at least 2. 5 percent and rising. An increase from 1 percent to 2.
5 percent is an increase of 150 percent, a huge jump with profound implications if sustained. Last year was encouraging. Productivity raised over 3 percent for the year and over 5 percent in the second half. It was said that the United States entered the 21 st century with its economy on a roll. GDP growth averaged more than 3 percent a year in the 1990 s. The country created 17 million jobs, driving unemployment down to a 30-year low of 4.
1 percent. In the 1999-2000 the economy wasn't doing so bad the unemployment rate was down, there were more jobs available, and production was doing well. When 2001 stated and even before then the economy was going down, many people were being laid off and so on. Then it happened the September 11 th attack on the US, this attack has left the economy in a very bad state, more than ever jobs are becoming very scarce and the productivity growth has gone down.
According to today's dis inflationary environment shifts the burden to productivity-enhancing cost cutting as the main route to higher profits. Yes, there will be higher profits but if the cost of production goes up then there will be less products made and that's where substitution of products will come in.