Many were expecting good news out of the Labor Department when it released the nonfarm payroll report for July. Unfortunately, this wasn't the case -- and the morning has taken a decidedly bearish tone.

According to the Labor Department, 131,000 jobs were lost during the month. The drop was attributed to the fact that 143,000 Census-related jobs were cut. Analysts expected overall employment to absorb the number of temporary jobs cut and show a drop of 65,000. When revising payrolls for May and June the picture turned even bleaker. The Labor Department revised the reading for those two months lower by 97,000, meaning fewer jobs than originally thought were created.

This morning's nonfarm payroll report was a good news/bad news sort of situation. The good news? The nation added 431,000 jobs last month. The bad news? Of those jobs, 411,000 were added thanks to the Census, meaning they were temporary workers.

In reality, payrolls advanced by 20,000 during May (taking the temporary jobs out of the equation), a rather disappointing number (and far short of the expected increase of 540,000).

Well, this was a nice surprise ... the unemployment rate fell to 9.7% in January from 10% in December, according to the Labor Department. This is good news, as expectations were for the unemployment rate to hold at 10% -- so some people are finding some jobs somewhere.

That said, the number of nonfarm payrolls dropped by 20,000 while expectations called for a gain of 25,000. With stock futures limiting some of their early morning losses, it looks as if investors and analysts are holding on to the unemployment rate news rather than the news that more jobs were lost than expected.

Let's face it, payroll is one of the drudgeries of running your own business. It's a big expense and complicated. Actually, some companies have imploded because of payroll problems.

So what to do? Here are things to consider.

Online Services: Just like with anything nowadays, there are online services to manage your payroll. One of the best I've seen is PayCycle.com, which is now owned by Intuit (INTU).

Everyone's cheering today the strong payroll report released by the Labor Department, but if you take a closer look at the numbers you'll understand why so many middle class folks do not think the labor market offers them any good news. While the government reported that unemployment held steady at 4.7% and 166,000 jobs were created, you must look at where those jobs were created and where jobs were lost to get the true picture.

Job growth was created in the service sector, which added 190,000 jobs - led by food services (37,000 jobs - primarily at restaurants), employment services (34,000 jobs) and health care (34,000 jobs). Job losses were seen in the higher paying manufacturing sector where 21,000 jobs were lost in October and 203,000 jobs have been lost in the last year. Employment at banks and mortgage brokers dropped 5,000 where 56,000 people lost jobs since February and more layoffs are expected as the mortgage mess continues to grow.

Richard Moody, Chief Economist for Mission Residential, also found that 21,500 jobs were lost in retail trade during October, which he said is the third consecutive monthly decline. In his October NonFarm Report, he wrote, this "is a sign that retailers are not expecting great things in the coming months."

Earnings also were flat. Just a 0.2 cent gain in average hourly wage to $17.58 an hour with no gain in the average workweek of 33.8 hours.

If you're in the top executive ranks you're pay may look good, but for the middle class these numbers don't show much hope of earning a better paycheck.

Lita Epstein has written more than 20 books including the Complete Idiot's Guide to Improving Your Credit Score due out in December.

Nonfarm employment increased by 167,000 in December,while the unemployment rate remained unchanged at 4.5 percent,according to Bureau of Labor Statistics. Average weekly wages rose 0.5 percent to $577.66. Hourly earnings for the year were up 4.5 percent.

Jobs grew the most in eight months, according to Bloomberg News, adding that this shows that the economy is weathering the slump in housing and manufacturing. The increase was higher than the 100,000-job median estimate of 70 analysts surveyed by Bloomberg. Economists surveyed by Dow Jones expected a 115,000-job increase and for hourly earnings to rise 0.3 percent. The yield on the benchmark 10-year Treasury note jumped 7 basis points to 4.67 percent following the report, Bloomberg said.

In its story, Reuters said, "some parts of the report may be troubling to Federal Reserve policy-makers who have expressed concern about potential inflation." The increase in average hourly earnings was the highest since April, Reuters said.

If jobs are healthy and wages are going up, why are consumers so worried? Many retailers reported disappointing holiday sales. Housing prices, with the exception of places like New York City, are soft.

Consumer Confidence numbers were the second piece of major economic data released today. The first was the Payroll numbers released at 8:30 AM and discussed in my earlier post.

This was literally a Tale of Two Views. The Payroll numbers came in better than expected, showing unexpected strength in the economy. However, Consumer Confidence data showed a dip from 92.4 in November to 86.9. Neither report indicated an extreme in a single direction.

What does this mean? It looks more like the soft landing that the Fed has been forecasting. I discussed this in detail in my prior post The U.S. Stock Market: Five Reasons 2007 is Looking Like 1995. The stock market is literally climbing the Wall of Worry.

This is great news for long-term investors and vindicates the bullishness that I have had since last summer. It allows the Fed to maintain its current position of neither raising nor lowering interest rates. The stock market continues to rises slowly.

However, it is driving the pundits and traders insane! They have been forecasting that Fed will have to adjust its position to reflect their own. The inflation hawks say that this means higher rates. The recession doves say that the current weakness in the economy will force the Fed to lower rates. The Fed seems to be winning the battle.

Remember not to fight the Fed. As I have said before, the Fed can maintain its position longer than you can remain solvent! The best and easiest way to make money in the market is to Follow the Fed.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.