Jobs Report Brings Much-Needed Good News

The unemployment rate remained unchanged at 4.9%, but for a good reason: More people were actively seeking work, a prerequisite for being counted as part of the labor force. The labor-force participation rate edged higher to 62.8% — a sign that people are still willing to come off the sidelines and look for work. This indication of slack in the labor market should relieve some of the pressure on the Federal Reserve to move aggressively on interest rates.

Adding to the robust job creation, the average hourly wage increased by 0.3% in July, a bit faster than expected. Together with a slight extension of the average work week, this puts more money in the pockets of U.S. households. This bodes well for consumer spending, which still comprises the most important component of the economy, suggesting that the U.S. is in relatively good shape to resist the growth slowdown afflicting other countries.

To be sure, the job market's performance is not enough to drive the economic takeoff required to meet genuine aspirations, counter alarming inequality and avoid a decline in the country's longer-term growth potential. That will require a greater contribution from the private sector, which in turn needs the government to implement policies — such as pro-growth infrastructure investment and tax reform, a more expansionary fiscal policy overall, more effective labor retooling and a lot better regional and global policy coordination — to make such a contribution possible. As is now widely — and finally — recognized, this goes far beyond what central banks can deliver on their own.