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The U.S. may not be a workers’ paradise—at least not yet—but its labor market is generating steady gains in jobs growth and pay increases. That much ought to be apparent in the July employment report, to be released Friday.

But good news for workers may be less so for Wall Street after Federal Reserve Chairman Jerome Powell suggested the central interest-rate reduction announced Wednesday won’t necessarily mark the start of series of cuts, causing the Dow Jones Industrial Average to drop 334 points. Further rate trims, on which the markets had been counting, would seem depend on weak economic data.

That isn’t expected in the coming jobs report, slated for release by the Bureau of Labor Statistics on Friday at 8:30 a.m. EDT. The consensus guess among economists is that nonfarm payrolls rose by 165,000 in July, which would be short of the stronger-than-expected 224,000 pop in June, but which in turn was way over May’s meager 75,000 increase. All of which proves it’s best not to put too much weight on a single month’s number.

With that caveat, the predicted July payrolls gain would be in line with the more meaningful average increase of 171,000 in the three months ended June 30. The anticipated BLS payroll number also would jibe with ADP’s July tally of private payrolls reported Wednesday, which the payroll processor estimated rose by 156,000.

Forecasts for July’s unemployment rate, which is the focus of the media and the political world, are for a downtick of 0.1 percentage point, to 3.6%, matching May’s number. In truth, the change in the jobless rate in the past two months has been result of rounding to a single decimal place (3.67% in June versus 3.62% in May). The bottom line is that unemployment hasn’t been this low since baby boomers wallowed in the mud at Woodstock in 1969.

This would seem to qualify as full employment by the conventional definition of economists. That’s corroborated by subjective measures, such as the University of Michigan’s consumer sentiment survey. The difference between respondents who felt jobs were “plentiful” and those who thought they were “hard to get” increased to 33.4 percentage points in July from 28.2 in June, notes Lewis Alexander, chief U.S. economist with Nomura.

The stronger labor market has translated into steady but unspectacular wage gains. That was confirmed by the employment-cost index, a quarterly report that takes in both pay and benefit costs. Measured on a year-over-year basis, the ECI was up 2.7% in the second quarter, down from 2.8% in the first quarter and 2.9% in the fourth quarter of 2018.

The significance of the ECI, explains Joshua Shapiro, chief U.S. economist at MFR, is that it is the least-volatile measure of labor costs and superior to the average hourly earnings number in the employment report, and therefore closely watched by policy makers. It also tracks closely with the National Federation of Independent Business’s compensation gauge, which, like the ECI, has seen its upward advance slow in recent quarters.

Finally, new claims for unemployment benefits continue to track around the lowest level in a half-century, in the low 200,000 level. Jobless claims are a leading indicator of the labor market’s health, unlike payrolls, which move in tandem with the economy, or the unemployment rate, a lagging indicator.

Finally, perhaps the best news for Main Street is that the strong job market is inducing workers off the sidelines. Some 125,000 people have been returning to the labor market each month, writes Torsten Sløk, chief economist at Deutsche Bank Securities. That may dampen wage growth, but it also reduces worries about labor shortages from the long-term unemployed losing skills, the opioid crisis, and those on disability insurance, he adds.

Lower unemployment, higher wages, and increased labor-force participation surely are good news for America. If there’s a downside, it’s that the economy will be less in need of monetary stimulus, and, in turn, there will be less gas to inflate asset markets.

Write to Randall W. Forsyth at randall.forsyth@barrons.com