While hiring has improved and there are clear signs of health in housing and the auto sector, employers are still holding back.
"If CEOs see and have confidence that this job growth, kind of moderate as it may be, is sustained, I think you'll see them taking some chances," said Deloitte CFO Frank Friedman. "If this is sporadic, and you have high months, low months, interruptions, I think it will be more difficult for them to get back. The worst thing is...they don't want to get ahead of where the economy is."
ADP's private sector employment report Wednesday said 188,000 jobs were added in June, slightly better than the 160,000 expected by economists, and it was also higher than the 134,000 added in May. While encouraging, it is still far from the robust growth of 200,000 plus jobs needed to bring down unemployment in a significant way.
"We're still going to see (jobs added in) leisure and hospitality and food service," said Diane Swonk, chief economist at Mesirow Financial. "I think manufacturing will be weak, but we could see some marginal increases in construction. Some of it is weather. It's been an unusually rainy and hot month which screws things up at both ends of the spectrum. I don't think you can underestimate some of the seasonally adjusted data that doesn't expect to have rainy days the entire month of June."
(Read More: Private Jobs Jump, Claims Fall as Labor Market Heals)
Mark Zandi, chief economist at Moody's Analytics, said he expects to see 175,000 payrolls for June, but he does not see a change in the pace of job growth until the end of the year. "175,000 is what we've been getting. We got it last month. We got it last year. We've gotten it in the past two years. In my mind, the job market hasn't changed much," said Zandi. And it won't change "not for the next six months or so because the fiscal headwinds are blowing very hard. You actually see that in the GDP numbers."
Zandi said second-quarter GDP is currently tracking at 1.2 percent. "Usually employment growth lags GDP growth by a quarter or two, so that signals 175,000 through the remainder of the year, and it may even take a step back. I don't think it's until late this year into next year where the fiscal headwinds fade and the job market would improve," Zandi said.
But the rate of job growth appears strong enough to encourage the Federal Reserve to pare back its quantitative easing program. The Fed has said it could cut back on the $85 billion in monthly bond purchases before the end of the year if the economy shows improvement, and it expects to end the purchases by the middle of next year, at a time when it expects the unemployment rate would be about 7 percent .
Just talk of the wind down of its Treasury and mortgage purchases unsettled markets and sent interest rates higher, including mortgage rates, even though Fed officials say the markets have overreacted and they have no plans to raise short-term interest rates any time soon. So that makes the number an even more critical event for markets than usual, and the market's hypersensitivity makes the Fed's balancing act of winding down its programs all the more difficult.
Mortgage rates have risen quickly and dramatically, with the 30-year fixed conforming loan at about 4.29 percent, off last week's high of 4.46 percent, but still well above month ago levels.
Zandi said if rates rise too much, it could threaten housing, a cornerstone of the recovery. "The key is if interest rates were to move higher before the jobs recovery," he said. "If this is it, and (the 10-year yield) can kind of hang around 2.5, we can digest it." The 10-year Treasury yield rose as high as 2.66 percent after the Fed's last meeting, but has been holding just under 2.5 percent since last week.
(Read More: Service Sector Growth Slows to 3-Year Low)
Economists are divided on the outlook for the second half, with some economists seeing growth accelerating and others seeing it closer to a sluggish two percent. The difference of opinion in part is the result of differing views on how much federal budget cuts have already affected the economy.
Swonk, like Zandi, sees more impact to come from the sequester, or automatic budget cuts that sliced across the government, and particularly hit defense. Swonk expects to see 145,000 total nonfarm payrolls for June, including a drop of 10,000 in public sector jobs.