Faint hints of nascent inflation threw another scare into investors Friday, but some economists think the fears are overdone.

The latest shivers came on news that producer prices rose 0.5% in September. It was the biggest jump recorded this year, made more notable because prices rose 0.4% even after excluding volatile food and energy costs, according to the Commerce Department.

Both readings were well above Wall Street's expectations of a 0.2% increase. Moreover, they seemed to reinforce warnings of possible inflation issued only two days earlier by Federal Reserve Chairman Alan Greenspan.

But the new numbers triggered very different interpretations from economists. Some concentrated on the broad-based price rises in September. Others noted that this is only the second month this year that producer prices have risen at all.

In fact, for the first nine months of 1997, the producer price index for finished goods declined 1.4% at a seasonally adjusted annual rate, versus a 2.8% gain during 1996. In the last 12 months, producer prices are unchanged.

At the same time, it was unclear how much the economic data released Friday have to do with Mr. Greenspan's concerns, which are focused on labor costs.

The Fed chairman effectively cautioned a congressional committee last week that if the unemployment rate falls much further, wage inflation will probably rise and so would interest rates. In doing so, he renewed an economic controversy.

"He has effectively elevated the status of the unemployment rate to the rank of most important indicator for the coming months," said economist Ian C. Shepardson.

The jobless rate is 4.9% and has hovered near 5% for a year with no significant uptick in labor costs-demolishing arguments that inflation would reignite after unemployment fell below 6%.

Experts have been left wondering what the U.S. economy's "nonaccelerating inflation rate of unemployment," or NAIRU as it is known among economists, really is.

Mr. Greenspan did not offer numbers last week but emphasized that the unemployment rate could only fall so far without triggering inflation, or, as he put it, "the unemployment rate has a downside limit."

The limit could emerge soon, according to Mr. Shepardson, who said he thinks the unemployment rate may be poised to fall further.

"The labor force is the key," he said. "In the second half of 1996 and the first half of this year, the labor force grew at nearly twice the usual long-term rate, reflecting sharply higher female participation and increased immigration." As a result, he said, the creation of many new jobs by the strong economy did not push the unemployment rate down.

This statistical phenomenon is unlikely to persist, or as the Fed chairman put it in far more technical terms: "There would seem to be emerging constraints on potential labor input."

If so, the unemployment rate may begin falling again over the next few months as demand for workers exceeds supply. From that point, said Mr. Greenspan, "the question is surely when, not whether, labor costs will escalate more rapidly."

As a result, Mr. Shepardson said, he expects to see an unemployment rate below 4.75% trigger interest rate increases by the Fed.

The nonaccelerating inflation rate of unemployment formula and the Phillips Curve-the relationship between unemployment and inflation - are not accepted as gospel by everyone, however.

"The fundamental flaw in the NAIRU concept is that it treats the United States as one national labor market," said Bert Ely, a financial consultant and Fed watcher. "In fact, it is not one, except over the very long term."

New England, the Southeast, the Midwest, and the Rocky Mountain states have a 4.1% unemployment rate, well below the national average, noted Mr. Ely, who labeled this area "full-employment America." But the Middle Atlantic, South Central, and Pacific states have a 5.9% jobless rate, well above the national average.

"The 1.8% unemployment differential between the two Americas translates into 1.14 million unemployed workers, or one-sixth of the total U.S. unemployment reported for September," Mr. Ely said, and ought to prompt the Fed to move very slowly on any policy change.

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