For the first time since the 1960s, U.S. productivity has been growing at an annual rate above 2.5 percent. As numbers go, this may not seem spectacular, but it has enabled the economy to sustain a very low level of unemployment--less than 5 percent in each of the past three years--while holding retail price inflation to about 2 percent a year. The late stages of most business cycles put irresistible pressure on employers to raise wages, which ordinarily leads to increased prices and in turn acts to slow or stop the expansion. But in the present circumstances, employers can raise wages without upping prices because of increased productivity.
This article was originally published with the title Productivity.