By Nin-Hai Tseng
August 5, 2011

FORTUNE — Phew! After the spate of bad economic data that propelled fears that the U.S. could soon slip back into an economic recession, today’s monthly report on the state of the jobs market has given us a sign – albeit a modest one – that things might not be as bad as we thought.

The unemployment rate in July fell slightly to 9.1% from 9.2% the previous month as the economy added 117,000 jobs. This is the largest amount of jobs added in a month since April. And far more than the 18,000 net new jobs originally reported in June.

Certainly this makes it less likely that the U.S. could fall back into a recession soon, at least according to Goldman Sachs (GS). The investment bank has come up with an interesting rule of thumb on recessions. It estimates that if the three-month average of the unemployment rate rises by more than three-tenths of a percentage point, the economy has either entered a recession already or will do so within six months.

Prior to July’s report, the three-month average unemployment rate was 9.07%, up from 8.9% in April. If July’s rate had increased to 9.3% and stayed there in August, it would have met Goldman’s threshold.

But we can only read so much into today’s monthly report. After weeks of bad economic news that on Thursday culminated in the stock market’s worst day since the 2008 financial crisis, it’s easy to inflate any good news. The market seemed to realize that — after jumping at the opening bell on Friday, stocks quickly reversed course.

The unemployment rate might have fallen slightly but that’s mostly because the number of people actively looking for jobs fell back – signaling that perhaps workers are feeling less confident about entering the job market. In July, labor participation fell by 193,000.

What’s more, though the economy added 117,000 jobs, it falls short of the 150,000 jobs a month needed just to keep up with population growth and prevent the unemployment rate from trending higher. And it would take at least twice that many to rapidly reduce unemployment.

“The bigger picture, then, is that two years after the recession ended the labor market has not really recovered at all, and may even have gone backwards,” writes economist Paul Dales of Capital Economics. “Even though immediate recession fears may fade a little on the back of this report, the key point is that he economy is still struggling and will continue to do so next year too.”

So even if the spate of bad economic news is now looking just a little less bad, it’s still bad.

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