The sorry state of the job market continues to temper investor sentiment; with the US unemployment rate hovering around 9.5 percent, the outlook for consumer spending and corporate profits remains weak.

Given employment’s critical role in the economic recovery, it’s hardly surprising that disappointing jobs growth can send he stock market lower.

At first blush, the July jobs report was shockingly bad; the consensus estimate called for 90,000 new jobs, but the headline number showed that the labor market shed 131,000 positions.

However, few commentators pointed out that the 143,000 temporary US Census workers laid off in July artificially inflated jobs growth earlier in the year. Conditions in the job market are bad, but July’s report overstates these issues.

And investors need to consider several data points. The headline number moves markets, but the private payrolls number provides a more meaningful look at what’s going on in the labor market.

Private businesses hired 71,000 workers in July, the seventh consecutive month of net hiring. Although employers remain tentative about the business environment, they’re still putting Americans back to work—albeit at a slower pace than many had hoped.

Many businesses have delayed or curtailed capital spending programs but continue to invest heavily in productivity enhancement. In fact, production increased 3.7 percent last year and 2.8 percent in the first quarter—a big reason why economic output has increased despite high unemployment.

But there’s light on the horizon.

Average weekly hours worked, a measure of employee utilization, increased to 34.2 hours in July—slightly off the pre-recession average of 34.6 hours.

Productivity boosts only go so far before a company must add new employees; hiring should accelerate soon.

A confluence of factors has made for a lumpy recovery—hardly a surprise in a credit-driven recession. But business conditions won’t have to improve by much for the recovery to pick up steam, and a double-dip recession remains unlikely.

What will spark the engine of economic growth? That’s a tough question to answer, but something is bound to light a match soon.

The Federal Reserve has announced that it will revive its quantitative easing program, reinvesting the more than $2 trillion it had used to prop up the ailing mortgage market in Treasury notes. Because the yields on Treasuries are linked to the interest rates paid on everything from mortgages to student loans, rates could head even lower.

At the same time the economies of China, Brazil and a number of other emerging market countries continue to grow, weakening the US dollar. In this scenario, US goods will be much more attractive in foreign markets.

A confluence of factors has made for a lumpy recovery—hardly a surprise in a credit-driven recession. But business conditions won’t have to improve by much for the recovery to pick up steam, and a double-dip recession remains unlikely.