The Department of Labor reported that unit labor costs increased by 1.4% while inflation-adjusted compensation rose to only 0.4 %. The higher rate of increases in productivity relative to the mount in hourly wage indicates that "companies are still able to keep a significant share of productivity gains for themselves and their investors." An implication of this is that companies are able to keep a larger share of their revenue as gross profits which can dampen the possibility of inflation as they allow companies to absorb more costs. However, the article also recognized that as companies have strong pricing power, they are hesitant in absorbing higher input costs but are inclined to pass these costs to consumers. The decline in the number of unemployed is indicative of a strong job market (Whitehouse).
The article revealed the interrelation of different macroeconomic variables in the society as well as showed how the economic climate affects the position and decision making of business entities. The concepts such as inflation, productivity, and employment levels which are presently tackled in the class and their relationships are more elucidated and understood in the business article.
Theoretically, labor productivity and wages are closely li ...Show more