This morning’s jobs report showed that the economy added a disappointing 38,000 jobs in May. While this number is depressed by the 35,000 Verizon workers who were striking during the reference period, even adding those workers back into the mix, the total number of jobs is low compared to recent trends. It’s true that as the labor market tightens we should see the number of jobs created each month fall, however this month’s dismal number is not even strong enough to more than keep up with population growth.

Not surprisingly, the overall and prime-age labor force participation rates fell, while wage growth held steady at 2.5 percent. As the labor market tightens we should see wage growth rise, however it’s clear that we are not at a level consistent with full employment. With wage growth this low, there is simply no threat of wage-led inflation. The Fed should bear this in mind when it meets later this month and not be too quick to raise rates and slow the economy.