The Federal Reserve System is the only central bank in the world that has a dual mandate, i.e., combating both inflation AND unemployment.  With inflation virtually non-existent, the focus is on unemployment.  The closely-watched monthly “Jobs” report will be released this Friday.  Absent some exogenous factor, the stock market will just churn around the flat line until then.

For all of 2013, we created 195 thousand jobs each month, on average.  So far this year, we have created 230 thousand each month, which is a significant improvement.  It is even more remarkable if you consider that GDP growth in the first quarter was a whopping, negative 2.9%.

With the job creation “machine” functioning so well, attention is turning to wage growth.  Normally, at this point in the business cycle, wages would be increasing 3.9% annually.  However, wages are growing at only 2.3%.  This confirms that inflation is non-existent.  It also reflects just how severe the recession was and how much negotiating strength that workers lost.

Wells Fargo wrote an interesting piece on how big companies don’t feel any need to raise wages now, since they didn’t reduce them during the recession — having just reduced the number of employees instead.  With the government’s JOLTS report showing employees are increasingly confident in changing jobs, big companies may want to re-think that position.

One final caution on this Friday’s highly anticipated Jobs reports.  It is normally issued on the first Friday of the month.  For August, it falls on August 1st, providing less time to massage the numbers, which increases the likelihood that it will be substantially adjusted in September.  This is not a bad thing, as it reduces the volatility following release of the report on Friday.

Since political considerations pollute and contaminate everything, one political consequence of an improving job-creating-machine is that it tends to benefit the incumbent President.  Fortunately or unfortunately, the President is not on the ballot this year.