Despite Rally, Worries Over Inflation Remain --- Economists Search For Better Indicators Than the Jobs Report
NEW YORK -- It's time to call a halt to the bond market's infatuation with the monthly employment data and look further afield for new ways to detect wage inflation.</br></br>That's the argument advanced by growing numbers of economists and market participants, as Americans continue to find jobs at a steady clip and the unemployment rate drops sharply. Weary of the bond-market gyrations touched off by each monthly employment report, they have embarked on a quest for new clues about inflation. Some are even putting their faith in anecdotal evidence instead of the sometimes confounding signals from the statistical data.</br></br>"The employment numbers are becoming increasingly less relevant as the numbers of people finding jobs has grown," argues Nancy Kimelman, chief economist at Technical Data in Boston. "Frankly, there aren't that many people left to hire. . . . A gain of 300,000 in today's labor market is the equivalent of what would have been [a] massive gain of 700,000 jobs four years ago."</br></br>The reason, Ms. Kimelman says, is that as the rate at which Americans find new jobs has leveled off at around 230,000 a month, the unemployment rate continues to fall and average hourly earnings continue to climb. Indeed, Friday's report showed that average hourly earnings rose six cents in August to $11.87, the highest level seen since December 1990, and the unemployment rate dropped to 5.1%. Those factors helped cap the Treasury market's "relief" rally, touched off when traders saw that the overall job growth was within expected bounds.</br></br>"The fixation on the `big' overall number of new jobs isn't sane," says one trader, disgruntled after a day of fielding more calls than he says he gets in an average week, all from clients seeking insight into a single figure.