Investors woke up Friday morning to great news about the economy.
 
The U.S. Labor Department reported that employers added 248,000 jobs last month, about 30,000 more than economists expected. In addition, job numbers for previous months were revised upward.

And the jobless rate fell to 5.9% last month from August’s 6.1%. The stock market rallied modestly on the news.
 
But those encouraging headline numbers don’t reveal the extent to which problems remain with the economy.
 
As a piece in Forbes.com points out, there are a slew of other data points that aren’t as encouraging.
 
For example, average hourly earnings were down a penny in September to $24.53, bringing the year-over-year growth rate down to 2%. And the much-discussed labor-force participation rate, instead of going up, ticked down slightly from 62.8% to 62.7%.
 
Recent headlines have been pointing to economic warning signs in the form of sliding energy prices due to weak demand from a weakened China, weak manufacturing, and a fall-off in new home construction, in part because of cash-strapped younger people.
 
It’s small wonder then, according to Fortune’s Chris Matthews, that a “whopping 72% of Americans believe we are still in a recession,” according to a recent poll from the Public Religion Research Institute.
 
It’s easy to conclude that Americans who talk to pollsters about the economy are simply misinformed about the economy or simply have a negative bias. But the lackluster income numbers support their distress.
 
As Matthews puts it, “The total number of jobs created, which had been a good enough metric to estimate the state of the economy, just isn’t cutting it anymore. The number we need to be looking at, which is also released in the monthly Employment Situation Report, is income. And unlike the jobs picture, there’s been little to no improvement when it comes to average hourly earnings.”
 
Matthews points put that since the current economic recovery began, average hourly earnings have only kept up with inflation. “And without rising incomes, there’s little reason for people to feel like their lives are getting better or for the economy to grow at a faster rate.”
 
Another interesting piece by Matthews seeks to get to the heart of economic woes that have prevented the housing industry from recovering more robustly since the end of the financial crisis. 

“According to Jed Kolko, chief economist at Trulia, all of this can be laid at the feet of the Millennial generation; or, to be more specific, the fact that members of that generation can’t find jobs,” writes Matthews. “In a report released on Wednesday, Kolko points out that while home prices, existing home sales, and the foreclosure rate have more or less recovered to their pre-bubble norms, two measures—new home construction and youth unemployment—show where the recovery has come up short.”
 
As Kolko writes, these measures “connect the housing market to the job market,” because youth employment creates demand for housing, and demand for housing creates good paying, middle-class jobs that can help further spur economic and wage growth.
 
The Fortune article concludes, “Housing prices have recovered, but no amount of home price appreciation can solve the fact that young people don’t have jobs, and the ones they do have aren’t paying well enough for them to form households of their own.”
 
Indeed, the extent to which many Americans are not engaged in the labor force is referred to by economists as “slack.” In a column that appeared this week in the New York Times, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joe Biden, writes that as long as this slack exists, the Fed will move cautiously in raising short-term rates despite the positive headline job numbers.
 
“There are at least two special factors that are distorting the unemployment rate’s signal,” writes Bernstein. “First, there are over seven million involuntary part-time workers, almost 5% of the labor force, who want, but can’t find, full-time jobs. That’s still up two percentage points from its pre-recession trough.”
 
Bernstein writes that the second factor masking the extent of slack as measured by unemployment has to do with participation in the labor force.
 
“Once you give up looking for work, you’re no longer counted in the unemployment rate, so if a bunch of people exit the labor force because of the very slack we’re trying to measure, it artificially lowers unemployment, making a weak labor market look better,” he adds.
 
When American’s get a collective pay raise and young folks can afford to move out of their parents’ basements en masse, we’ll have real reason to celebrate about the economy.