Sobering news in a good jobs report

From a Bloomberg View editorial Friday:

The improvement in the U.S. labor market is certainly good news. It could soon become a headache, however, if it persists alongside disappointing economic growth.

The economy added 255,000 jobs in July, after adding 292,000 in June. Employment growth was weaker earlier in the year, and two solid months don’t make a trend – but even so, the labor market is in pretty good shape.

The problem is that economic activity, according to the most recent indications, remains subdued. The implication is that growth in output per worker – productivity – is lagging. Underlining the point, the current recovery has so far relied on consumer spending much more than investment, which remains in the doldrums. Companies that don’t invest don’t get more productive.

High employment is great – but without stronger growth in productivity, a tight labor market won’t raise living standards as much as it should.

A strong jobs market increases the likelihood that the Federal Reserve will resume its effort to normalize monetary policy later this year by raising interest rates. That would be wise.

The corollary to this is that fiscal policy has to do more. Behind the good news of the latest jobs numbers, then, is a sobering lesson: America’s future prosperity will depend less on the Fed and more on the ability of the next president to work with Congress and the states.