I recently attended the World MoneyShow 2010 in Orlando, Fla, where I had the opportunity to talk to hundreds of investors from around the country. The outlook for US inflation was by far the biggest concern of most attendees.

Although I’ve sounded the alarm about inflation in recent issues, the US employment situation should keep that trend in check over the next 12 to 24 months.

The January report showed that the US unemployment rate fell from 10 percent to 9.7 percent, but investors should take this statistic with a grain of salt. The Dept of Labor uses the birth/death model to estimate how many new businesses open and how many close in any given month. Generally speaking, the model creates the biggest swings in January.

The approach also tends to inflate employment levels, which are almost always revised downward in subsequent months. For example, the number of job losses in December increased from the initial estimate of 85,000 to 150,000–a huge gap. Add the number of discouraged workers who have given up on finding a job–this group totaled 1.1 million in January, up from

734,000 in the prior year–and the true unemployment rate is likely around 14 percent. Unemployment that high stymies demand and weighs on prices.

But the symptoms of inflation are still present. Although the top line consumer price index number was 2.7 percent last year–right in the Federal Reserve’s comfort range–lower food and energy costs are holding the index back. A look at the index’s components reveals that the price of almost everything else is rising much more rapidly.

Even if these prices are within the Fed’s comfort zone, prices will likely heat up as the employment situation improves–at that point, demand for goods and services will follow suit. Watch out once that happens.

That’s why Fed Chairman Ben Bernanke is widely expected to tap the brakes on the money supply by year-end. The next meeting of the Federal Open Market Committee (FOMC), which sets interest US interest rate policy, is scheduled for March 16, and should produce a much more hawkish stance on interest rates.

We can hope that the Fed will soak up a large chunk of the stimulus money that was handed out, but based on the sheer volume of cash involved, the central bank will struggle to tamp down inflation over the next few years. Although that’s a concern for another day, let’s hope it doesn’t take another Volckeresque recession to keep inflation in check.