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Jobs Market Bumping Along Bottom of Very Deep Hole: Economist

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A weak jobs report just landed with a thud on Wall Street.

The numbers: 169,000 new jobs were created in August, just missing consensus estimates. There was a huge revision down for July however -- from 162,000 to 104,000. And the unemployment rate dropped to 7.3%.

Give it a bit to see how the market settles this morning and whether this number could push the Fed to delay the taper.

But stepping back, it’s important to remember where this jobs data really fits in the bigger picture of a labor market that has been severely stunted since falling off a cliff during the recession. Typically what gets all the attention is how the data came in relative to expectations, but that's too myopic of a view now.

Related: $2 Trillion Shadow Economy Not Counted in Jobs Numbers

“The labor market is just bumping along at the bottom of a very deep hole,” Heidi Shierholz, economist at the Economic Policy Institute in Washington says. “We are adding jobs every month. In no way are we in a recession, but we are also not adding enough jobs to dig out of the hole that was caused by the great recession.”

Related: Here's How You Fix the Sluggish Job Market: Dean Baker

Shierholz says the problem really boils down to demand. We asked her for hard facts to best substantiate that view. Check out the video to see what Shierholtz says.

In terms of fueling demand, Shierholz says higher wages, which Walmart (WMT) employees and fast-food workers have been agitating for, would help. She also points to federal government stimulus.

Related: Jobs & President Obama: A Close Look At His Record

But would that give businesses the confidence to make intensive capital investments to expand capacity (for example, the automakers, which are struggling to keep up with robust demand currently) if they had the sense that the demand they were seeing was stimulus-fueled, so perhaps temporary?

Shierholz says that’s a good question. She says the stimulus would be temporary until the private sector takes over -- to get us out of the mire we’re stuck in with weak economic activity.

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