No one likes it when the unemployment rate hits a new high, which it did in August. But the details of the employment report are much better than the rise in the jobless rate suggests. Private-sector payrolls declined by 198,000 in August, which is the smallest drop in a year. In addition, private payrolls were revised up slightly in June/July. What makes this even more remarkable is the fact that the federal government increased the minimum wage in late July, so August was the first month that reflected job losses related to this forced wage hike. Right on cue, employment among teenagers fell by 150,000 in August (seasonally-adjusted). These figures suggest that private-sector payroll losses among workers age 20 and older might have been as low as 48,000 in August.

The second good sign for the labor market is that broad measures of wages seem to be rising again. Average hourly earnings went up by 0.3 percent for the second straight month, the largest gains so far this year. The economy is in a V-shaped recovery. Given the deepness of the recession and the fact that employment tends to be a lagging indicator, it will take time for the economic recovery to translate into job gains, but we believe payrolls will start expanding by the end of this year and that the unemployment rate will not be going above 10 percent (as the consensus expects). Corporate profits were up at a 24 percent annual rate in the first half of 2009, suggesting businesses have re-built their ability to expand payrolls.

— Robert Stein is a senior economist at First Trust Advisors.