The U.S. economy has taken a drubbing. The bursting of the high-tech bubble. Dramatic cutbacks in business investment. A synchronized global recession. The terrorist attack on 9/11. Two million corporate layoff announcements. No wonder alarms were raised that the U.S. economy could sink into Japanese-style stagnation at best and a 1930s-era American depression at worst.

That fear is now evaporating. The best guess of the economic forecasting fraternity is that a recovery is taking hold. The economic news is increasingly positive, from the consumer confidence measures to new orders for durable goods. The Fed was confident enough to leave its benchmark interest rate unchanged for the first time in a year. The question then is Why has the recession been so shallow?

The answer is the "new economy." Strong productivity growth along with organizational advances in harnessing advanced information and communications technologies conspired to limit the downturn. Of course, gee-whiz high-tech gear did not stave off a recession. But when the economy tanked, management raced to wring additional efficiencies out of their operations.

The economy also gained critical support from fiscal and monetary policy. Even though Congress failed to pass a stimulus package at the end of 2001, last year's $275 billion surplus will likely shrink to a $50 billion deficit this year—an enormous boost to the economy. And, with inflation flat in a high-tech economy, the Fed had plenty of room to aggressively cut interest rates.

Of course, there are risks to the optimistic forecast. The biggest menace is Enron. The energy company's financial disaster and unfolding scandal threatens to undermine investor faith in management. Disgust over Enron's systemic duplicity is also casting a pall over free-market policies that nurtured competition and high-tech investment. Still, many forces are gearing up to contain the catastrophe, from investors favoring companies with clean balance sheets to Congressional pressure for tougher accounting practices.

Odds are that the first recession of the Information Age will be the mildest on record.