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The New Economy

What was so new about it?
Recall the implications of a surge
in productivity growth: What are
some priors???

What about Real wages??
 What about profits and thus the value of the
stock market?
 What about labor market conditions?
 What about economic growth?
 What about inflation?
First pic

The percent change in nominal wages.
%
So real wages were rising, since
the percent change in nominal
wages exceeded the percent
change in prices

What are the implications on the amount of
people employed?
So more people are working and
they are making a higher real
wage since they are more
productive

A look at GDP growth during this time
Productivity Growth and the
budget implications:

What is happening to personal income tax,
corporate income tax and capital gains tax
revenue ? Why?

Government outlays???
Why?
What about profits? The stock
market?

Two Pics

The Dow since 1995
The Nasdaq since 1995
Check out the gains in WEALTH
in the stock market and real
estate….

Those were the Days!
So this was the goldilocks
economy – people were working,
making higher real wages,
making gains in wealth in the
stock market, had job security
and were very confident in things

The future was so bright you had to wear
shades!
Check out this pic

Remember, consumption accounts for 70%
of our economy (the economic pie)
Now investment

Check out the percent change in equipment
and software
And finally…..

The wealth to income ratio and the personal
savings rate
Check out the “port” variables in
the next slide

According to our speed limits, we were
speeding……unless the speed limit had
changed??? Maybe the port had moved
during this time!
End of New Economy