Measuring the New Economy

HE “new economy” and the favorable economic conditions accompanying it have been the subject of considerable attention in the media, on Wall Street, among economists, at central banks, and in government agencies. Although some seem to take it on faith that there is a permanent change in the economy powering the strong performance of the U.S. economy over the last 5 years, many question this view and are scouring economic statistics for evidence on the importance of this new economy to economic performance and whether there really has been a fundamental and lasting change in the structure of the economy. This concern has been accentuated by the recent slowdown in the economy, leading many to ask if the change was simply cyclical; while others have speculated on the impact of just-in-time inventories and other aspects of the new economy on the depth and length of a possible downturn. This paper provides background information on the new economy and how it relates to BEA’s economic accounts. It is designed to answer the following questions: ● What structural changes have occurred that define the new economy? ● Why is it important that these changes in the economy be captured in gross domestic product (GDP) and BEA’s other economic accounts estimates? ● What do we know now about the size and impact of these changes on the economy? ● Where does the new economy show up in the accounts? T