As inflation edged higher this year, many economists -- including those at the Federal Reserve -- pointed to higher productivity and stable labor costs as signs that prices were not likely to rise unchecked. But a new Labor Department report suggested yesterday that the threat of higher inflation had not diminished and that it might take more monetary restraint to hold prices down. The report found unit labor costs -- which take into account changes in productivity and hourly wages -- increased much more sharply in the first half of the year than the government first calculated.
See "Labor Costs Shake a Pillar of Fed Policy", Jeremy W. Peters, The New York Times, September 6, 2006