Jobs: steady as she goes

The only remarkable thing about the July jobs report was its consistency. The trends that have been in place for the past several years—2% annual gains in private sector employment, a slow decline in public sector employment, very slow growth in the labor force, and a low labor force participation rate—all remain in place. Thus, we're left with an economy that is likely to continue to grow at a disappointingly slow pace. The Fed's Quantitative Easing strategy has yielded no meaningful change in the economy's ability to create jobs, but that is not surprising since there is no reason to think that it should. With the economy growing at a steady and unremarkable pace, and with systemic risk declining, there is little reason for the Fed not to begin to taper its bond purchases within the next several months. Bond purchases only serve to feed the world's appetite for safe-haven assets, and with each month that goes by with no signs of economic deterioration, that appetite is slowly but steadily ebbing.

Both surveys of the jobs market show the same thing: relatively steady private sector jobs growth for the past three and a half years.

The private sector has been generating new jobs at roughly a 2% annual pace for the past three years. That's almost exactly the rate of jobs growth that we saw in the years leading up to the Great Recession.

The decline in public sector employment has been welcome, since it had become bloated, but that decline shows increasing signs of coming to an end. The private sector is the source of most of the economy's growth, and it has been doing OK, but private sector employment is still below its pre-recession peak.

The labor force is still growing at a relatively slow pace, and it is significantly below its long-term trend. Many millions of workers have "dropped out" for a variety of reasons, and that is the source of the ongoing decline in the unemployment rate.