Major surprises in important economic indicators like this often have a dramatic impact on the financial markets, and today was no exception. Bond traders had a major attack of inflationophobia and stampeded to the nearest exit, driving the yield on the 30-year T-bond from 6.93 percent to 7.19 percent. The long bond closed at 7.18. Stock market participants undoubtedly believed that the bond people knew what they were doing, so they joined in the panic and knocked the Dow Jones Industrial Average down by 114.90 by the end of the day.

About a quarter million people gave up on looking for jobs during June. Their withdrawal from the workforce caused the unemployment rate to drop from 5.56 to 5.28 percent. Otherwise the unemployment rate would have been 5.45 percent.

Average hourly earnings of private production and nonsupervisory workers increased by 9 cents in June to $11.82. This probably helped to shake up the bond traders. It was the largest monthly rise in the 31 years the Labor Department has been tracking this number. In the past year, hourly earnings rose by 3.4 percent.

Today's report didn't tell us to what degree the wage rise was offset by increased productivity. We will not have any new data on productivity and unit labor costs until the initial report for the second quarter comes out on August 14. In the first quarter, for the nonfarm business sector, an annualized 3.3 percent increase in hourly compensation was offset by a 2.1 percent increase in productivity. Thus, the actual annualized rise in labor costs was only 1.2 percent. So, it may well be that wage increases in the second quarter will be similarly offset by increased productivity.

Almost totally ignored in today's chaos was the report by the Economic Cycle Research Institute (ECRI) of the June value for its Future Inflation Indicator. The indicator has been dropping for the past two months, falling from 107.4 in April to 107.0 in May and then to 106.2 in June. The Institute also publishes a weekly version of the inflation indicator that has declined steadily since May 24.

In a separate report, the Columbia University Center for International Business Cycle Research (CIBCR) announced today that its Leading Inflation Index also fell from May to June, dropping from 103.8 to 103.4.

The CIBCR and ECRI inflation indexes were both developed by business cycle indicator pioneer Geoffrey H. Moore. Moore is the head of the recently-formed ECRI. When I first discovered Moore's work, almost thirty years ago, he was already a leader in his field. Back then, he was the Director of Research at the National Bureau of Economic Research (NBER). He has been the Director of the CIBCR and is the author of several books, including "Indicators of Business Expansions and Contractions" (1967), "Business Cycles, Inflation and Forecasting" (1983), and "Leading Indicators for the 1990's" (1990).

People should be paying attention to what this man is saying. I know that I do, and it has been reported that Fed Chairman Alan Greenspan is another one of his big fans.

And, what Moore's indicators are saying at this time is that, for the foreseeable future, increases in the rate of inflation are not a problem.

The ECRI monthly report is presently scheduled to come out at 10:25 A. M. on the same day as the employment report. I wasn't able to find anything on it in the online news services until late this afternoon. If this report came out a couple days before the employment report, maybe financial market participants would see it, and take its contents into consideration, and cut out some of this irrational speculation on the future course of inflation.

If anybody out there knows Dr. Moore, could you please ask him if he would consider releasing the report a couple days earlier.

Byline: Lafferty (MF Merlin)