What's bad for the economy is good for the military. With an all volunteer force, the military has to compete in the job market for new recruits. That effort was taking a beating in the late 1990s, and probably will again as the economy recovers from the millennium Internet bubble. Not only are more men and women applying now, but more first term troops are deciding to stay in. This means that not as many new recruits are needed each year. Six months ago, the Navy thought it would need 48,000 new recruits this year. That goal has been scaled back to 39,971, and will probably go a little lower before the year ends. Nearly a hundred thousand sailors are returning from the Middle East and have been told that new deployment plans will keep them at home more often then in the past. So morale is high, and the civilian job prospects do look very bright. Thus sailors are staying in uniform. And there's also the 911 factor. The nation is technically at war, and people in the armed services are more aware of it than civilians. Everyone is standing a bit taller, and less eager about getting out of the service. 

Overall, the quality of the troops is going up. It was pretty high to begin with in the late 1990s, but the recruiters can afford to be more picky now, and they are. Troop commanders know they won't take a lot of heat from up the line if they toss a troublesome troop out, and the troops know it too. America has probably never had such a high quality and combat experienced military before (when there wasn't a major war going on). Even World War II depended on a lot of guys who wouldn't be allowed to enlist today. The weapons and equipment are more capable than ever before, and require brighter troops to make them work.