How will businesses respond to costlier energy?
Energy is just one more cost for businesses to deal with at a time when shareholders are relentlessly demanding better profits. Moreover, it also comes as productivity is slowing. The Labor Dept. reported that productivity posted a healthy 2.9% advance in the second quarter, but that increase was slower than in recent quarters at a time when rising benefits costs are pushing up labor compensation.
As a result, unit labor costs last quarter rose at the fastest quarterly pace in two years. If prices fail to keep up, then margins will get squeezed and companies will be forced to find new efficiencies, most likely at the expense of jobs. One example: