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.

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

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