Today’s jobs report showed the economy added 157,000 jobs in July and the unemployment rate fell slightly to 3.9 percent. The falling unemployment rate reflects positive changes in the labor market, as more workers entered the labor force. However, this month’s job growth is below three-month, six-month, and twelve-month trends.

The employment-to-population ratio for July rose 0.1 percentage points to 60.5 percent, while the prime-age employment-to-population ratio increased 0.2 percentage points to 79.5 percent.

Meanwhile, nominal wages grew 2.7 percent year-over-year, matching last month’s rate. This continued slow wage growth is an obvious sign that the economy is not at full employment, and there are no indications that wage growth is accelerating. Clearly, employers are still not feeling pressure from a tightening labor market to increase wages, despite the unemployment rate hovering around 4.0 percent. As the economy continues to advance towards full employment we should start seeing stronger wage growth across the economy, but given the lack of such growth, the low unemployment rate looks to be overstating the strength of the labor market.

A tighter labor market would disproportionately benefit black and Hispanic workers, whose unemployment rates are 6.6 percent and 4.5 percent, respectively, as compared to white workers whose unemployment rate dropped to 3.4 percent this month.

Employment should be the top priority of policymakers—especially those at the Federal Reserve. Without signs of accelerating inflation, we should see just how much we can usefully nudge up wages and inflation and productivity by letting the labor market continue to tighten.