How labor data can help make sense of a confusing economy

It’s the start of a new month, which means it’s time to talk about jobs again. New numbers are slated to be released Friday morning.

It’s a little confusing to talk about the economy right now, because experts are calling it a “mixed picture.” But the jobs report is the one report that can provide some clarity, said Michael Gapen, chief U.S. economist at Morgan Stanley.

“The jobs number is still the most important number that we receive about the economy every month,” he said.

It tells economists both about the health of the business sector (if it’s willing to expand or not) and the health of the consumer (if they’ll be willing to spend or not).

“The U.S. consumer is about two-thirds of the overall economy,” Gapen said. “Most households consume out of labor market income.”

Even if unemployment doesn’t rise sharply, “the fact that we have a jobless expansion and compression efforts on the wage front by business leaders that are cost-conscious leads to an environment where income growth is slowing,” said Gregory Daco, chief economist at EY-Parthenon.

If prices inflate more than incomes grow, that limits spending ability. “As we start to see further deceleration in income growth, that will constrain more and more families across the U.S.,” he said.

And while savings and credit can help, Daco does wonder how much longer consumers will be able to keep spending as they have been.