The new "new economy".

The article discusses the improvement in productivity based on new information technology in the United States as of September 13, 2003. Quarterly changes are notoriously volatile, but over the past year productivity has increased by an impressive 4.1%. Productivity always bounces back in the early stages of an economic recovery (as firms produce more with their leaner workforces). But the recent spurt has been unusually robust, especially since this has been America's weakest recovery in modern history. According to J.P. Morgan Chase, over the past five years America has enjoyed the fastest productivity growth in any such period since the second world war. Robert Gordon, an economist at America's Northwestern University, was one of the most outspoken new economy sceptics. In a widely cited paper published in 1999, he estimated that after adjusting for the effects of the economic cycle, all of the increase in labour productivity was concentrated in the manufacturing of computers, with no net gain in the rest of the economy. He concluded that the economic effects of computers and the internet were not in the same league as those of electricity or the motor car in the early 20th century. In a new paper, he admits that more recent data have shown his original conclusion to be wrong: faster productivity growth has proved more durable and has spread to the wider economy. However, as he points out, the latest data raise many new questions about why this is so. Perhaps the biggest puzzle about America's productivity gains is why Europe's IT investment has not delivered similar increases.