The American economy is really strong.

No secret there. No secret, either, that all those economists who were talking about how much the economy was going to slow this year were wrong. In its survey Monday, the

Philadelphia Fed's

quarterly poll of economists showed expectations that

gross domestic product

would grow by a robust 3.2% this year. When the Philly took its poll last quarter, expectations were that the economy would grow 2.1% in 1999.

The American economy is really strong, and

Alan Greenspan

knows it. That is why he spoke more about risks of the economy heating up than of it slowing down in his

Humphrey-Hawkins

testimony. It is really strong, and the Treasury market knows it. That is why the yield on the long bond is 48 basis points higher now than it was at the beginning of the year.

'If payrolls were 200,000, they'd rally,' Chase's Don Fine said of the market reaction to the upcoming jobs report. 'If payrolls were around 250,000, they'd be a little uncomfortable. And if payrolls were 300,000, good night.'

These are all things you need to keep in mind going into the coming week -- a week fraught with data that most expect will flash more economic strength. A lot of people have been worrying about these reports for a while -- that is one of the reasons the bonds have taken a shellacking, and stocks with them. As always, one wonders if the market may have overshot the mark.

"Certainly this week's bloodbath has discounted a lot of bad news," said David Ging, Treasury market strategist at

Donaldson Lufkin & Jenrette

. "Just as a corrective measure, you need to see a little movement into strength next week. The market is very oversold and I think that particularly in the

long bond we got to some very good levels."

There is an assumption in Ging's remarks, and it is a big one: that the data will not be even stronger than the market is beginning to expect. Of the three major economic reports --

personal income and consumption

and the

National Association of Purchasing Management

survey on Monday, and the

jobs report

on Friday -- the greatest risk lies in the jobs report.

Wages -- A Scary Number

"Perhaps the scariest number of the week is the wage number in the employment report," said Mickey Levy, chief economist at

NationsBanc Montgomery Securities

. The labor market is getting very tight, said Levy -- he thinks unemployment dropped to 4.2% in February. "On the heels of strong domestic growth, one should expect wage pressures," said Levy. "I'm looking for a 0.4% increase." He thinks 250,000 jobs were added in the month.

Though Levy's estimates are a bit stronger than consensus forecasts, they are roughly in line with what the bond market expects. The whisper numbers, if you will.

"If payrolls were 200,000," said Don Fine, chief market analyst at

Chase Asset Management

, "they'd rally. If payrolls were around 250,000, they'd be a little uncomfortable. And if payrolls were 300,000, good night."

Here's the big worry. Economists thought that payrolls would come in at 158,000 for November. They came in at 270,000. They thought payrolls would come in at 212,000 for December. They came in at 378,000. They thought payrolls would come in at 135,000 for January. They came in at 245,000.

Given the lousy record, you've got to wonder if the February report will be another blowout. Still, there's a difference between a showing of more economic strength and an imminent rate hike. "Clearly, the Fed is laying the groundwork for a potential shift toward a tightening bias," said Fine. "But I do not think that they're as close to a tightening as some people in the market think."

As with the bond market, the stock market, too, may be overstating the possibility of the Fed moving anytime soon. "The stock market is jittery here because they think the Fed is going to move," said Seth Tobias of

Circle T Partners

, a New York hedge fund. "But I don't think that's on the foreseeable horizon."

Given that fact, Tobias isn't making too much of the backup in the bond market. "I think it's pretty clear that the economic data from February is pretty strong," he said, "but I think in the real world the long bond yield going to 5.6% -- to the average guy on the street, it's not going to change that much about what's going on in the economy."

The selloff in the bond market has sparked a rotation out of tech issues, though, said Tobias, who sees money switching into economically sensitive issues and financial stocks. He noted that earnings estimates on many of the financials have been moving higher, and he expects that trend to continue.

"I think the market can basically work its way higher if it finds new leadership," he said. "Overall, we are constructive on the market, but I want to be positioned to be short large tech and long areas of the market that we like."

An Increase in Overvaluation

Others are not as sanguine about what's happened to the bond market.

J.P. Morgan

market strategist Doug Cliggott bases a lot of the work he does on how expensive stocks are relative to the bond market. Based on that, he went negative stocks on the morning of Feb. 4. The

S&P 500

closed the day before at 1272. The yield on the long bond was 5.35%. Cliggott judged equities 15% overvalued. With the selloff in bonds, now he thinks equities are 19% rich.

"The dilemma we're confronting is, the economy seems fine," he said. "And if the economy's fine, there's no reason the bond market should be at panic levels."

It's a situation where stocks will likely stay stuck in their range. Say the bond rallies -- that would probably only happen if the economy were slowing. Which would be bad for corporate profits. Say the economy keeps steaming ahead -- that puts pressure on bonds, putting the yield higher. Which makes them a more attractive place to put money than stocks.

"We're just treading water as time goes by and we let earnings catch up with prices," he said, "because prices are pretty far ahead of earnings right now. Our best bet is we stay in this range."