By Matt McDonald, (202)-822-1205, mmcdonald@hamiltonps.com

There was an audible sigh of relief from Washington to Wall Street with a decent July jobs report that could have easily succumbed to headwinds that included the debt ceiling debate, the threat of a debt rating downgrade and multiple mass layoffs.ᅠ Instead, we saw a “good” jobs report with 117,000 new jobs in the month of July, revisions up for the two previous months and the unemployment rate dropping to 9.1 percent.

Unfortunately, it’s an indication of how far we have defined down economic success that we are celebrating a number at this level.ᅠ Even worse, if we scratch the surface of the report, it’s not uniformly good.ᅠ The household survey was actually disappointing, with a drop in employment of 38,000 and a drop in the labor force of 193,000. The number of people seeking employment also declined by 156,000.ᅠ It seems that once again the decline in the unemployment rate was driven by people leaving the workforce, rather than the creation of new jobs.ᅠ The labor force participation rate is now at a new low of recent decades at 63.9 percent.

The benchmark for the unemployment rate to get below 8% by Election Day was 255,000 jobs per month going into today’s report (see the memo), but with another mixed report, that number has risen once again to 272,000 jobs.ᅠ Given the difficulty of reaching that number on a consistent basis going forward, HPS is also beginning this month to track progress toward a more modest 8.5 percent unemployment by Election Day 2012.ᅠ This would require the creation of 220,000 jobs on a monthly basis going forward.

Today’s jobs report bought time for policy makers in Washington and may marginally decrease concerns for a potential double-dip, but the unemployment situation across the country remains a slow-motion crisis that shows no signs of abating.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.ᅠ Prior to joining HPS, Matt worked for McKinsey and Company. ᅠHe holds an MBA from MIT’s Sloan School of Management and an undergraduate degree in economics from Dartmouth College.