Unlocking the Mysteries of the New Economy

1. The New Economy – what was so new about it?

3. Check out the “port” variables in the next slide • According to our speed limits, we were speeding……unless the speed limit has changed??? Maybe the port had moved during this tie!

5. 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?

6. First pic – the percent change in nominal wages.

8. %

9. So real wages were rising, since the percent change in nominal wages exceeded the percent change in prices

10. What are the implications on the amount of people employed?

12. So more people are working and they are making a higher real wage since they are more productive

14. 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?

16. What about profits? The stock market? Two pics

17. The Dow since 1995

18. The Nasdaq since 1995

19. Check out the gains in wealth in the stock market and real estate…. Those were the Days!

21. 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!)

22. Check out this pic – remember, consumption accounts for 70% of our economy (the economic pie)

24. Now Check out investment

26. And finally – the wealth to income ratio and the personal savings rate

28. End of New Economy