Real compensation gains have been supported by robust advances in labor productivity, which in turn have partly reflected heavy investment in plant and equipment, often embodying innovative technologies. Can this favorable performance be sustained? In many respects the fundamental underpinnings of the recent U.S. economic performance are strong.
Flexible markets and the shift to surplus on the books of the federal government are facilitating the build-up in cutting-edge capital stock. That build-up in turn is spawning rapid advances in productivity that are helping to keep inflation well behaved. The new technologies and the optimism of consumers and investors are supporting asset prices and sustaining spending.