Stock markets have been up these last few days with Wall Street performing particularly well. European stocks have also been recovering, and while the story has been more mixed in Asia, markets there have generally been trending upwards as well.

One of the prime motivating factors behind the optimism on trading floors has been the improving labor market in the United States. The reasoning is pretty straight forward: if the labor market in the world’s largest economy continues to improve, business must be improving and at the same time consumers will have more money to spend. That should drive further economic growth.

Is The Labor Market Really As Strong As It Seems?

With the unemployment rate now below 6% for the first time since the depths of the Great Recession, the employment market certainly does seem to be growing. While there are some reasons to be excited, however, there are also some reasons to be concerned.

Labor market: Part-time, Low-Wage Unemployment Remains High

Consider, for example, that the U6 unemployment rate remains at 11.8%, suggesting both that a large number of people who want to be employed are still too discouraged to start up the job hunt, and that many people who want to work full-time are stuck in part-time jobs.

In fact, between January 2008 and February 2014 most jobs created have been low-wage, while mid and high wage jobs have been lost in shockingly high numbers. Indeed, 958,000 mid-wage jobs, and 976,000 high wage jobs have been lost in the United States, while 1.85 million low-wage jobs have been created.

Updated numbers aren’t available, but there’s no reason to suspect that these trends have reversed in the last few months.

It should come as no surprise that participation in the labor force remains historically low at about 62.7%. Before the Great Recession, the labor force participation rate was typically at 66% or higher.

And while more people may be employed, wages themselves are stagnant. In September wages actually fell by a penny, and for the year have grown by a mere 2 percent. At first glance a 2 percent gain may seem like an improvement, however most of these gains will have been wiped out by inflation.

Labor market: Consumer Spending Has Flat lined

From the point of economics low-wage jobs won’t be enough to kickstart consumer spending, which in turn is necessary to encourage genuine economic growth with businesses expanding their pay rolls to meet increased demand. In fact, in 2013 consumer spending actually declined by .7% despite the fact that the U.S. was supposed to be in a midst of a recovery.

Again numbers in 2014 don’t seem to all too inspiring. Consumer spending did rise .5% in August after incomes rose .3%. By itself, this number appears encouraging but consumer spending actually decline .01% in July. At best, the picture is mixed but absent more sustained wage growth it’s difficult to see how consumer spending can rise at a substantial rate.

Labor market: What Does This Mean For the Economy?

It’s easy to get excited over rising employment, and indeed there are some genuine reasons to be optimistic. Most likely, increased employment will lead to a solid holiday season. In the long-run, however, unless the quality of jobs, and more specifically wages, begin to rise there are plenty of long-term risks.

Unless wages start to genuinely rise, consumer spending may be at risk in the long-run. Consumer consumption now accounts for about 70 percent of the U.S. economy so the importance of consumer spending cannot be underestimated. Further, export countries like China depend upon demand from developed economies like the United States.

Meanwhile, with the costs of essential goods, such as college tuition, health care, and housing continuing to rise, there is a risk that discretionary income levels could actually begin to decline. All of these factors will make it difficult for the U.S. economy to record meaningful growth.