For some, the benign inflation outcome of 1996 might be considered surprising, as resource utilization rates -- particularly of labor -- were in the neighborhood of those that historically have been associated with building inflation pressures. To be sure, an acceleration in nominal labor compensation, especially its wage component, became evident over the past year.
But the rate of pay increase still was markedly less than historical relationships with labor market conditions would have predicted. A typical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity.