Today’s employment report showed the U.S. economy created 88,000 new jobs in April. That was lower than the 110,000 jobs economists projected, down from the 177,000 jobs created in March, and the weakest job growth since November of 2004. Slower jobs kept wage growth down. Average hourly earnings grew just 0.2%.

In the logic of Wall Street, the report was good news. It goes something like this: weak job growth and slow wage growth will push the Federal Reserve to cut interest rates. But Lehman Brothers Senior Economist Drew Matus says that logic is a bit flawed. Once the economy is weak enough for the Fed to cut rates, the economy will be in a recession. That’s generally not good for stocks.

But Matus expects the job outlook to brighten. He points to improvement in the unemployment claims data and improvements in both the manufacturing and service sector. He sees the greatest risk from slower consumer spending further squeezing retail jobs.

Economist Kathryn Kobe says the biggest risk is the continued fallout in the housing slowdown and impacts from the subprime mortgage meltdown.

Clearly, the economy is softening, but most economists I’ve spoken with expect the economy to stay out of recession and proceed to a soft landing.