Although there is still no hard evidence that labor costs have begun to intensify, Fed Chairman Alan Greenspan has warned that rising wages and fringe benefits soon may put pressure on prices. And(And Greenspan) he says the Fed is poised to act swiftly if they do.

"The relatively modest wage gains we've seen are a transitional rather than a lasting phenomenon," the Fed chairman told the Senate Budget Committee recently. "The recent pickup in some measures of wages suggests that the transition may already be running its course."

Wage pressure is particularly strong in the Midwest, where the job market is uncommonly tight. In Rockford, Ill., where the jobless rate has fallen to 4.6%, employment specialist Sylvia Gaffney says employers have begun bidding up wages to compete for workers.