Just got my hands on the latest July jobs report, and it’s got some interesting insights to share. So, here’s the deal:

The report showed a lower-than-expected job gain of 187,000 last month. But hey, don’t pop the champagne just yet! The unemployment rate fell to 3.5%, which is below the Federal Reserve’s 2023 target. Sounds like good news, right? Well, not so fast.

While the overall unemployment rate dropped, other indicators in the report tell a different story. The U6 rate, which measures the broadest level of unemployment, went down to 6.7% in July. But it’s worth noting that it had risen by the same amount in June. The U6U3 spread also decreased by 0.1% to 3.2%, showing that the labor market is still pretty tight.

Now, here’s the thing that caught my attention – the average length of unemployment. It went down for the second month in a row to 20.6 weeks. Although it’s still higher than what we saw at the beginning of the year, it’s not as alarming as it used to be. The number of workers unemployed for over 27 weeks is also near an all-time low. This indicates that people are finding new jobs faster than before, but it also means the labor market is far from being back to normal.

Speaking of job openings, the June report showed a slight drop, but the number of unemployed people decreased even more. This worsened the labor shortage, leaving 3.625 million more job openings than unemployed individuals.

Oh, and let’s not forget about the labor force participation rate. It’s still below pre-pandemic levels, but that doesn’t mean people aren’t pulling their weight. Among 25- to 54-year-olds, the participation rate is at or above pre-COVID levels. However, those aged 20-24 and 55+ are still lagging behind. Many older workers retired during the pandemic and haven’t returned, which could spell trouble for the future.

Now, here’s where things get a bit concerning. A strong labor market is usually great for the economy, but it’s also directly linked to inflation and price stability. The increase in average hourly earnings year-over-year ticked up to 4.8% in July, and it’s been moving in tandem with the core inflation rate for a while. If earnings continue to grow, the Fed’s job of controlling prices becomes trickier.

So, in a nutshell, the labor market is not giving the Federal Reserve any relief when it comes to interest rates. We’ve got an unprecedented number of job openings compared to unemployed folks, and the quick turnaround of the unemployed shows a real demand for more workers. It might take a few months of near-zero job growth to bring the labor market back to equilibrium.

So, if you’re looking for a job, now might be a great time to seize those opportunities. And if you’re a business owner, the labor shortage might pose some challenges, so make sure to plan accordingly.