• Productivity is the key to the outstanding performance of the US economy. As a result of the tremendous revival in productivity in recent years, inflation has remained dormant and corporate earnings have advanced at a double-digit pace. Even now, as economic growth has begun to moderate, productivity gains remain strong. If they stay that way, inflation will probably continue to be absent and earnings gains will be reasonable. • The traditional definition of productivity is output per hour worked. Federal Reserve chairman Alan Greenspan has said that he believes that the productivity pickup is permanent, not cyclical. Productivity rose at a 5.3% rate in the second quarter, stronger than our estimate and 5 .1 % above its year-earlier level. • The only other periods during which productivity gains were strong occurred in the early stages of economic recoveries, not ten years into an expansion. Unlike the current performance, rapid
