New economy

The new economy is the result of the transition from a manufacturing-based economy to a service-based economy. This particular use of the term was popular during the dot-com bubble of the late 1990s. The high growth, low inflation and high employment of this period led to overly optimistic predictions and many flawed business plans.

Origins

A 1983 cover article in Time magazine, "The New Economy", described the transition from heavy industry to a new technology based economy. By 1997 Newsweek was referring to the "new economy" in many of its articles.

After a nearly 25-year period of unprecedented growth, the United States experienced a much discussed economic slowdown beginning in 1972. However, around 1995, U.S. economic growth accelerated, driven by faster productivity growth. From 1972 to 1995, the growth rate of output per hour, a measure of labor productivity, had only averaged around one-percent per year. But by the mid 1990s, growth became much faster: 2.65 percent from 1995–99. America also experienced increased employment and decreasing inflation. The economist Robert J. Gordon referred to this as a Goldilocks economy-the result of five positive "shocks" – "the two traditional shocks (food-energy and imports) and the three new shocks (computers, medical care, and measurement)"