With these rapid increases in productivity, business costs were well contained, and the rate of price inflation was stable, despite a fall in the unemployment rate to below 4 percent. Productivity growth continued over the four quarters of 2001. That it increased is impressive, given the historical tendency of productivity growth to turn negative when the economy enters recession.
This performance provides additional evidence that the improvements in productivity growth that we have witnessed since the mid-1990s have been largely structural and will persist for a time. But the fundamental factor leading me to be cautiously optimistic that much of the improvement is likely to be sustained is my outlook for the state of technological advancement in the United States.