Janet Yellen says Federal Reserve policy makers need to look at a broader range of data to get a good handle on the job market. She hasn’t highlighted one labor indicator that economists say is sounding inflation alarms: short-term unemployment.

With total joblessness at 6.7 percent in February, still higher than the Fed wants, the rate for those who’ve been out of work less than 27 weeks was just 4.2 percent. That’s near the lowest since April 2008 and 0.6 percentage point below the average since 1948, Labor Department data show.

The depressed level suggests the U.S. labor market is tightening, raising the odds that a pick-up in wages will eventually lead to faster inflation, according to economists including Michelle Girard of RBS Securities Inc. That’s important because Fed policy makers have cited a slack job market and subdued inflation as reasons for keeping short-term interest rates near zero even as the economy picks up.

“If the Fed is wrong and the labor market is tighter, firms are going to have to start at some point paying more,” said Girard, chief U.S. economist for RBS in Stamford, Connecticut. “Some of the Fed’s comfort level -- ‘We can just sit with these easy money policies without any worries about future inflation’ -- might be called into question.”

So far there is little sign of inflation taking hold. Producer prices unexpectedly dropped 0.1 percent in February, held back by the biggest decrease in the cost of services in almost a year, a Labor Department report showed today. Consumer prices rose in January at a 1.2 percent annual rate, below the Fed’s 2 percent target.

Fed Meeting

Fed Chair Yellen and her colleagues will review their monetary strategy when they meet on March 18-19. After their last gathering in January, they said they expected to hold rates near zero “well past the time” total unemployment falls below 6.5 percent.

Girard and fellow economists Michael Feroli of JPMorgan Chase & Co. and Peter Hooper of Deutsche Bank Securities Inc., both in New York, argue the short-term unemployment rate provides a more accurate picture of tightness in the labor market.

That measure leaves aside those who have been without a job for more than 26 weeks, a group that represented 37 percent of the unemployed in February, compared with 16 percent in the 20 years before the start of the last recession.

When people are out of work for so long, they tend to become less active in seeking a job, and employers consider them less suitable for hiring, according to studies by researchers at Princeton University, Columbia University and the Boston Fed.