Jobs report could shed light on 2nd half of year

Economists project 196K added in July

The labor market seems to have defied gravity in the first half of 2018.

Monthly job growth averaged a robust 215,000, up from 182,000 last year, despite a low 4 percent unemployment rate that’s spelling more worker shortages. The July jobs report, out this week, could shed light on whether payroll gains will maintain that surprising pace or slow in the second half of this year.

Consumer confidence has dipped from the 18-year high reached in February, but only modestly. Credit strong job and income growth, as well as federal tax cuts that have left more money in workers’ paychecks. While gas prices have climbed this year, that has been more than offset by higher stock and home prices that have lifted household wealth, economist Gus Faucher of PNC Financial Services Group says. Economists surveyed by Action Economics estimate the Conference Board will announce Tuesday that its consumer confidence index edged down slightly in July but remains at a lofty level.

Confidence tends to foreshadow consumer spending, and the same forces that have lifted Americans’ outlook have bolstered household purchases in recent months after a tepid start to the year. Economists expect the Commerce Department to report a healthy 0.5 percent increase in consumer spending for June.

The Labor Department releases its closely watched employment report Friday. One reason job growth has topped expectations is that plentiful jobs and rising wages have drawn Americans on the sidelines – such as discouraged workers or those on disability – back into the labor market. While that trend likely will continue, Faucher expects it to slow in coming months. That could mean slower, but still solid, average monthly job growth of about 180,000 in the second half of the year, Faucher says. Economists expect Labor to announce 196,000 job gains in July.

Consumers have fueled the service sector, which makes up about 80 percent of the economy. Economists estimate ISM will report that its service index continues to reflect vibrant growth.