Today's jobs report was, on its face, decent but not spectacular.
The good: The unemployment rate fell to 5.1 percent in August while labor force participation held steady. Hourly pay for private sector workers was up 2.2 percent year over year, which is maybe a bit less than expected given the low jobless rate, but it's still a sign of consistency.
The not-so-good: Employers only added 173,000 new jobs—less than anticipated, and down from the 245,000 each of the past two months.
These numbers are both extremely important and somewhat meaningless.
Why important? At the moment, the Federal Reserve is trying to decide when it will start to hike interest rates, which would have powerful ripple effects throughout the financial world and the real economy. It wants to do so both because a strengthening labor market could one day spark some inflation (which central bankers don't like) and because it eventually needs to bring interest rates back to normal so it will have some room to cut them and stimulate the economy the next time there's a recession. For a while, it seemed somewhat likely that the Fed would pull the trigger this month, but that was thrown into question thanks to all of the China-inspired market turmoil in August.1 Whether or not the Fed opts for "liftoff" before the end of this year will depend heavily on whether the labor market stays on the basically healthy course it has charted for the past year. Today's low jobs number might be interpreted as a sign that Janet Yellen & Co. need to be cautious.
Now, why somewhat meaningless? Today's jobs report is basically a first draft. The payroll figures will be revised over the next couple of months as the Bureau of Labor Statistics gets a better handle on its data. As Mark Gilbert pointed out at Bloomberg View on Thursday, August has had by far the largest revisions of any month in recent years—after polishing its stats, the BLS adds on average 90,000 jobs to the total. So it's really a bit early to draw conclusions about exactly what happened last month. Given the good news about unemployment, it's reasonable to think that August's numbers will look better after they've been refined a bit. But at this point we don't know.
1The value of the dollar has been rising quickly of late, possibly to the detriment of U.S. exporters. When things go sour in the world economy, sometimes the dollar is treated as a safe haven, which pushes up its value. Right now, of course, things are going sour in the world economy—raising interest rates would encourage even more people to buy dollars, raising its value further and pinching U.S. businesses even harder.