Labor Costs and Productivity!

According to CNNmoney.com productivity growth has declined while the cost of labor has risen from the third to the fourth quarter of 2006. This has several worried that the rate of inflation will increase. We have learned from our economic classes that a competitive firm will hire until the Value of Marginal Product equals the Wage.
VMP or ( Value of Marginal Product ) is measured by Price * (Change in quantity divided by change in Labor) or MR. If the productivity of labor decreases most likely the firms MR will decrease causing VMP to decrease.
Wages are determined by the change in total costs divided by the change in labor. If Labor costs increase or productivity decreases can we really be sure as to what will happen to wages? Firms might just use their money on capital. Perhaps they will loose workers due to their higher costs.
After reading this article what do you think will happen to the quantity of labor if we look at solely competitive firms in our markets for the months after the decline of productivity and the rise in labor costs? What will happen to the wage rate? Will this really cause an increase in the rate of inflation?