Wages Affect Inflation?

Is an increase in wages in America beneficial to the economy? Many economists, such as Stephen Stanley at RBS Greenwich Capital, believe that increases in labor wages will ultimately lead to inflation, which is an economic term used to describe the general rise in prices. Recently labor costs in the U.S. have increased, which seems beneficial, but may be a sign of inflation.

From the statistics of The Wall Street Journal it is evident that labor costs have indeed risen, which means; workers are being paid more, that they have been given more bonuses, or that they have received better health care and pension benefits. This is a good thing right? Michael Moran at Daiwa Securities America Inc. says that if the pay gains are mostly driven by bonuses, they will not be inflationary risks. On the flip side, if unit-labor costs rise, then inflation could be just around the corner. *Note: A unit-labor cost is the cost of labor for each unit of output. Defined by Rafael Gerena-Morales.

For now it seems that inflation is at ease according to the Federal Reserve's August research studies, but one can never be too sure. Will this sudden raise in our nation's labor costs ultimately lead to inflation?