Just last week, we got what some called a “stellar jobs report.”

The U.S. announced employers added 255,000 jobs in July 2016, easily beating analyst expectations for an addition of just 180,000.

At the same time, according to the U.S. Labor Department, the unemployment rate remained at 4.9%, which came in below expectations for 4.8%.

Meanwhile, wage growth continues to lag. 

In fact, wages only grew 0.3% for the month and 2.6% for the year, suggesting there’s little reason for the Federal Reserve to worry about inflationary risks.

And if we dig a bit deeper into jobs numbers, we can see just how poor those unemployment numbers truly are.  The U6, for instance, which accounts for discouraged workers and those looking for part-time work, rose slightly to 9.7%.

The number of Americans working part-time rose to 5.94 million from 5.84 million. The number of discouraged workers who gave up looking for work moved to a five-month high of 591,000.

There’s no doubt that an addition of 255,000 jobs in July is encouraging.

However, when it comes to jobs growth, it’s about both quality and quantity

The problem is the quality of the jobs isn’t exactly up to par, as about 100,000 of those 255,000 jobs were part time.

Some of the main sources of jobs growth were temporary jobs, as well as leisure and hospitality (waiters and bartenders, for example).  In fact, the hospitality sector added 45,000 jobs in July.   Those aren’t exactly long-lasting, well-paying quality jobs that will contribute to robust economic growth.

For example, the number of temporary workers jumped by 17,000 in July, when compared to June reports.  The year-over-year growth rate for temp jobs has now risen to 1.9% for July for a total of 2.93 million – its highest level since December 2015.

In addition, the temporary penetration rate – temporary jobs as a percent of total employment – jumped to 2.03% in July from 2.02% in June – another indication that jobs growth is not as great as what many believe it to be.

While the media would have us believe that the U.S. is nearing – or is at – full employment, we must consider that 94,333,000 adult Americans are no longer in the labor force. 

Given the reality of the jobs report, recent GDP data, and the fact that U.S. productivity just fell for the third quarter in a row (the longest losing streak since 1979), we continue to believe the Federal Reserve will not raise interest rates this year.

Economic realities may be bleak, but it is not bothering the stock market as the Dow, NASDAQ and S&P 500 indexes hit all-time highs this week.

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