Job growth forecasts are bright for rest of 2015
The labor market appears to be gaining momentum as it enters the second half of 2015, with headwinds such as the strong dollar fading and consumer spending expected to accelerate.
The Labor Department's payroll report for June, due out Thursday, should provide an initial gauge of the more favorable economic climate. Economists surveyed by Bloomberg estimate that employers added 230,000 jobs last month, up from an average 217,000 in the first half of the year.
Monthly job tallies can be volatile. But even if Thursday's total disappoints, many economists expect stronger job gains during the next six months.
"Everything is firing on all cylinders," says Mark Zandi, chief economist of Moody's Analytics. Zandi helps private payroll processor ADP compile a monthly report of private-sector employment growth.
He expects an average 250,000 job gains a month for the remainder of the year, just below the 260,000 added in 2014. That marked a 15-year high.
On Wednesday, the ADP report said businesses added a better-than-expected 237,000 jobs in June, though its count often diverges significantly from Labor's.
Among the more encouraging signs was the addition of 7,000 jobs by manufacturers. While the advances were modest, they followed several months of job cuts as a strong dollar made producers' exports more expensive for foreign buyers. Those effects should be easing as the dollar stabilizes, Zandi says.
Meanwhile, oil prices have risen recently after tumbling by more than 50% since last summer. The fall prompted oil producers to shut down drilling rigs and trim a net average of about 15,000 jobs a month this year. But the decline in rig totals already is moderating, Zandi says.
Another encouraging sign for the labor market is a recent surge in housing sales and new home construction, buoying employment in the industry and boding well for manufacturers that make lumber and other related products.
Consumer spending, which accounts for more than two-thirds of the economy, also looks poised to take off as wage growth picks up and Americans spend more of their savings from cheap gasoline.
Last month, Labor reported a blockbuster 280,000 new jobs. But Michael Gapen, chief US economist at Barclays Capital, says that total was inflated by catch-up effects after harsh winter weather and other temporary factors hampered the economy and labor market early in the year.
Other economists are cautious in their predictions. Nariman Behravesh, chief economist of IHS Global Insight, expects an average 200,000 monthly job gains the rest of the year. He says the robust dollar could continue to hinder exports. But even Behravesh acknowledges the biggest risk to his forecast is that it's too low.