The sky is not falling. Today's unemployment report is that payrolls went down by -4,000. That's not the real story.
The household survey showed that employment went down -316,000, which is very significant. In addition, -340,000 removed themselves from the workforce which is why the unemployment rate stayed at 4.6%.
Why is the sky not falling? Compared to August of 2006, there are 1,522,000 more workers employed than at that time.
Also remember, employment changes lag the economy by about six months. These declines are the net result of slower economic activity in the first quarter. Because the second quarter was much better, any change in the employment data in coming months should be rather moderate.
Nonetheless, the Fed, and others, will look at this report as allowing them the ability to lower rates when they meet again on September 18. I still expect a quarter point and no more.