No Excess in Labor Market

In 2005, Boberski is looking for average job growth of 140,000 per month, about 10,000 per month lower than over the past year.

Michael Gregory, a senior economist at BMO Nesbitt Burns, is slightly more optimistic, calling for around 150,000 to 175,000 jobs per month in 2005.

"We're not talking boom times here," he said. "Growth is going to be modest."

Gregory thinks there is some downside risk to his payroll estimate of 185,000 on Friday, but he still believes the Fed is right to be concerned about inflation. While wages are likely to remain contained, productivity is slowing, the dollar is declining and commodity prices are high, he said.

So far, businesses have been unable or unwilling to pass high wholesale costs on to consumers. Indeed, Delta Airlines (DAL Quote) said Tuesday that it will cut fares by up to 50% in an effort to lure more customers. Analysts say the move could intensify price wars across the industry.