The unemployment rate is close to what some economists believe to be its lowest sustainable level; capacity utilization in manufacturing is moving closer to its long-term average level; and unit labor costs have begun to creep higher. At this time, the odds are that inflation pressures are contained and will remain so.
The behavior of labor compensation, the height of profit margins, and still-strong productivity growth all suggest that workers and businesses continue to face very competitive market conditions and that cost increases will remain in check.