This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Jobs Report Is Totally Chalk -- And That's a Good Thing

NEW YORK (TheStreet) -- The jobs report was about as chalk as chalk gets.

The economy's 217,000 job gain was within 4,000 of consensus estimates, as reported by Econoday. Details such as the 34.5-hour average workweek and the 0.2% gain in average hourly wages were exactly what people predicted.

But the widely forecasted jump in the unemployment rate didn't happen. It stayed at 6.3%, because the work force participation rate remained 62.8% of people older than 16. That's bumping along at 35-year lows, as the number of Baby Boomers retiring continues to allow relatively modest jobs growth to keep the unemployment rate relatively low.

The report is mixed enough to mean that the Federal Reserve will stay its dovish course. Policymakers are looking for better increases in wages before they decide they need to make any tightening moves that matter. Raising interest rates is still a late-2015 question, if it even arises then.

But the report is strong enough that it's still plausible to see the unemployment rate drop to less than 6% by this fall.

With unemployment this high, it's still too soon for the economy to look for a Goldilocks jobs report -- not too hot is still not hot enough. That said, here are some things to love -- and to be wary of -- in the data.

Love this:

People are coming back to work, without pushing unemployment higher.

About 237,000 unemployed people actually did re-enter the work force in May. Yes, that offset a big decline in April, but it's a good sign. One thing to remember, though, is that all those people came back and the participation rate didn't budge. That's a clear sign that demographics are driving the participation rate lower, in a way that means the unemployment rate will continue to fall.

The industry distribution of the jobs is pretty good.

Professional and business services added a solid 55,000 jobs -- about the same as the pace of the last year. That's where the guts of middle-income jobs that have been slow to return from the recession are to be found. Durable goods manufacturing added 17,000.

Be wary of this:

Two big industries that need to come back didn't.

Construction (+6,000) and government employment (+1,000) are the two obvious weak points. To get the economy to a consistent 250,000 jobs a month, construction should be adding 15,000 to 20,000 and governments should be adding about 10,000.

Another concern is, paradoxically, big gains in health care and the low-wage complex of bars, restaurants and tourism. Leisure and hospitality jobs are better than a stick in the eye, but tend to pay less. And health care employment ideally should grow slower than the economy at a time when containing health costs is a top policy goal.

The bond market has pushed rates lower this morning, figuring the news means mostly that the Fed will see no reason to accelerate the very, very gradual tightening that it has barely begun. That's probably a good takeaway for now. And nothing about the report was novel enough to change the medium-term picture of unemployment continuing to fall but not fast enough that the environment around us feels transformed.

>>Read More: Broadcom, Walgreen and DuPont Are 3 Buys Near 52-Week Highs

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%
YHOO $36.01 -1.42%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs