Productivity: The Real Story: Its growth is strong, and many of the New Economy gains will survive

There is little doubt that at least some of the productivity gains of the late 1990s are turning out to be short-lived. The dot-com boom and the stock market bubble of 1999 and early 2000 clearly overstated the strength of the economy and the size of its efficiency gains. Moreover, falling profits and tight capital markets have companies cutting back on capital spending, which will slow productivity gains. And the specter of terrorism is effectively imposing a tax on companies, forcing them to build up inventories and spend more on security. That, too, will be a drag on productivity, at least for a time. Yet despite these changes, the factors that helped propel the productivity boom of the 1990s are not likely to disappear.