Today’s jobs report showed that 164,000 jobs were added in July. After a couple of weak months this year, we are now seeing solid job growth for the last two months, even with sizable downward revisions for June (and continued losses in retail). Average payroll employment growth this year so far has been notably slower (165,000) than last year’s average growth (223,000). Federal employment was expected to be impacted by the Census hiring—but, the data show that non-postal federal employment increased by only 2,500 in July.

The unemployment rate remained stable at 3.7 percent. The labor force participation rate and the share of the population with a job each increased 0.1 percentage points in July, a sign that slowly more and more would-be workers are drawn back into the labor force in search of jobs and many of them are securing them. The share of workers who want full-time work but can only find part-time work (involuntarily part-time) also fell significantly in July. Unfortunately, the prime-working age population (25–54 years old) saw some losses in July; both the prime-age participation rate and the employment-to-population ratio fell 0.2 percentage points. Neither series has seen sustained improvement since last summer.

Wage growth continues to fall short of what we’d expect in an economy that has had historically low unemployment—the unemployment rate has been at (or below) 4.0 percent for the past 17 months. Nominal wages grew 3.2 percent in July over last year, remaining below levels consistent with Federal Reserve’s target for inflation and long-term potential productivity growth. Recent data releases have provided ample evidence of a slowdown in the U.S. economy, as well as a slowdown in nominal wage growth. This week’s decision by the Federal Reserve to cut short-term interest rates by a quarter-point makes lots of sense.

Unfortunately, disappointing wage growth is not a new feature of the U.S. economy. According to new data released this week, hourly pay has continued to diverge from economy-wide productivity. Since 1979, productivity has risen six times faster than hourly compensation for the typical U.S. worker.