The U.S. Bureau of Labor Statistics reports that 195,000 jobs were added last month -- significantly better than the consensus forecast of economists (165,000). Another 70,000 jobs were added in March and April thanks to revisions. While the news isn’t bad, we shouldn’t be calling it “good,” either. Some perspective is in order.

Remember above all else this analysis from the Federal Reserve Bank of Chicago, which looks at the impact of aging and slowing population growth to determine how many jobs are needed to return to full employment. These economists calculate that it would take four more years of job gains at the current pace of 195,000 per month to completely close the gap that began opening at the end of 2007.

In other words, the U.S. is on track for a lost decade under the most optimistic assumptions. It will take even longer to return to full employment if the Chicago Fed’s demographic analysis turns out to be incorrect, or if the present rate of job creation can't be sustained over the next several years.

The composition of jobs being added is also a worry. Of the 195,000 jobs added last month, 112,000 were in the categories of “leisure and hospitality” and “retail.” Those positions usually pay less and have fewer benefits. The number of people working part-time who would rather be working full-time soared in June by 322,000. No wonder average hourly earnings for private-sector workers continue to increase by only about 2 percent annually.

Other details from the BLS household survey are even less encouraging. The increase in employment last month did nothing to lower the number of people who are unemployed or “marginally attached” to the labor force. Phrases like “changed little” and “essentially unchanged” pepper that section of the report.

Despite the lackluster data, markets have reacted strongly. As of this writing, yields on 10-year Treasury notes are up nearly 0.18 percent. Most of this increase can be attributed to higher real interest rates rather than heightened inflation expectations. Price action in the Eurodollar futures markets further suggests that higher yields can be attributed to the anticipation of higher short-term interest rates, rather than concerns about the “tapering” of asset purchases.

According to the so-called “Evans Rule,” the Fed won’t raise the short-term interest rate unless unemployment is below 6.5 percent and the near-term inflation forecast exceeds 2.5 percent. Most people, including those at the Fed, don’t think either of these thresholds will be breached until sometime in 2015. The interesting question, therefore, is what will happen in the years immediately following, when the Fed starts to tighten?

Future short-term rates began spiking a few weeks ago in response to the Fed’s latest economic projections and Chairman Ben Bernanke’s press conference. The latest employment data have exacerbated the rout. As of this writing, short-term interest rates in the out years have increased by an additional 0.4 percentage point. Given the Fed’s projection that the “normal” level of the short rate is around 4 percent, recent developments imply that the Fed’s tightening cycle will be completed sometime in early 2019.

This may make sense, but there are reasons to think that the market action is being driven by factors other than fundamental analysis of the U.S. economy. William Dudley, the president of the Federal Reserve Bank of New York, recently reminded observers that “the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6.5 percent, so long as inflation and inflation expectations remain well-behaved.”

Dudley is saying that a short rate of 0 percent could be consistent with an unemployment rate of 5.0 percent, as long as inflation continues to be “well-behaved.” Since the U.S. won’t return to full employment until at least 2017, this could easily mean that the first rate hike won’t occur until 2016 or even as late as 2018. If the market pricing suggests otherwise, it may reflect unwinding trades by leveraged players rather than a fundamental disagreement over the path of Fed policy.

(Matthew C. Klein is a contributor to the Ticker. Follow him on Twitter.)