The low U.S. unemployment rate has raised inflation fears because employers might have to bid up wages to retain and attract workers, says St. Louis Federal Reserve Bank economist Howard J. Wall. A measure of labor market "tightness" is the number of vacant positions, which tends to rise as unemployment falls.

However, the U.S. does not measure vacancies directly. Instead, the best surrogate is the Conference Board's Help Wanted Index (HWI):

• The HWI is constructed by tracking the number of help- wanted ads in the largest newspaper in each of 51 large cities.

• The raw data are seasonally adjusted and combined into a national HWI by weighting each of the 51 series by the cities' sizes.

• The national HWI has risen on a yearly basis every year since 1992, except 1996, suggesting the number of vacant positions in the country as a whole was 44 percent higher in 1998 than in 1992.

However, the HWI has risen faster in some regions than others. The HWI for the Mountain region, which combines the city HWIs of Denver, Phoenix, and Salt Lake City, had increased 65 percent by 1998.

In contrast, the HWI for the West South Central region, which combines the city HWIs for Dallas, Houston, New Orleans, Oklahoma City, San Antonio, and Tulsa, stood at 120 for 1998, implying a 20 percent increase in vacant positions relative to 1992 (index=100).

The HWI has been criticized because it may drift upward due to factors other than the number of vacant positions. Potentially the most important of these factors is the shift toward white- collar positions, says Wall; such jobs tend to be more heavily advertised than blue-collar ones.

Source: Howard J. Wall, "Help Wanted," National Economic Trends, May 1999, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Mo. 63166, (314) 444-8808.