This is a temporary reprieve. Productivity trends are very volatile.  Two strong quarters does not assure further large productivity gains for the rest of the year. Still, six months of above average productivity growth has kept a surge of liquidity and imported commodity inflation from reaching wage rate gains and raising product costs.  Wage gains have slowed this year and unit labor cost has increased only at a 0.6% annual rate.

This permits postponing the monetary tightening needed to offset the monetary stimulus over the last year.  Unless the productivity surge is sustained, which is unlikely, rising unit labor costs will force a turnabout to tighter monetary policy in the first half of next year.  This will be done to head off worker demands for cost of living pay increases which could potentially set off a prolonged wage-price spiral.  The last one lasted a decade and took a deep recession to end.

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