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Rates Will Rise as Labor Market 'Slack' Outweighed by Stability

NEW YORK ( TheStreet) -- Employment data underperformed expectations in July, but the Federal Reserve should raise rates in the near future as the overall economy stabilizes.

Nonfarm payrolls increased 209,000 last month after surging by 298,000 in June, the Labor Department said on Friday.

Meanwhile, data for May and June were revised to show a total of 15,000 more jobs created than previously reported, indicating underlying momentum.

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Although July payrolls missed headline expectations, the addition of 209,000 jobs marked the sixth straight month that employment has expanded by more than 200,000 jobs, a stretch last seen in 1997.

The chart below is an aggregate indicator of labor market conditions. It takes into consideration jobs added, the labor force participation rate, wage growth, and the level of part-time jobs in the economy.

As is seen, the strength of the U.S. labor market is historically low, but has stabilized since the financial crisis. Jobs have been added to the economy, but the decline in labor force participation, stagnant wages, and a high percentage of part-time work represents the so called "slack" Fed officials are still concerned with.

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