Today’s jobs report showed the economy added 213,000 jobs in June. The unemployment rate rose to 4.0 percent, increasing for positive reasons as more workers entered the labor force. While an increase in the unemployment rate is generally considered to be a negative sign for the economy, a rise accompanied by an increase in labor force entrants can be taken as an indication that more would-be workers are hopeful about their job prospects and have begun actively seeking work. The employment-to-population ratio for June held steady, but hopefully this increase in participation will translate into more job holders in ensuing months.

Meanwhile, year-over-year nominal wages grew 2.7 percent, consistent with growth for much of this year. This continued slow wage growth is an obvious sign that the economy is not at full employment. Furthermore, despite a rash of employer anecdotes about being unable to find qualified workers, if there were widespread skill shortages we would expect to see stronger wage growth as employers bid up wages and benefits to attract and retain qualified workers. Instead, wage growth has been flat over much of the last year.

What’s surprising is not that employers may have to start increasing wages now as the labor market keeps tightening, but rather that they haven’t felt that pressure yet, despite an unemployment rate hovering around 4.0 percent. Given that today’s prime-age employment-to-population ratio is still below the peaks of the last two business cycles, it appears that the low unemployment rate is overstating the strength of the labor market. As the economy continues to advance towards full employment we should start seeing stronger wage growth across the economy, but we are not there yet.