First off Welcome to the forum and I commend you on your observational skills.
In terms of your neighbor, it's tough to say exactly what set off your dog. It might well be the jealousy/protective instinct.
But for me, the key thing is that you are able to calm your dog immediately down when it does gesture in an aggressive way. Best case scenario is that a firm NO! from you settles the dog right down.
Now that you have a baby, it's even more imperative imo, that your dog is obedient and stops its behaviour when you tell it to.
In general dogs rarely go from calm to aggressive in an instant. There are almost always signs and you are looking out for them.
Given that you have keen observational skills and i expect they stay that way, I think you are safe overall....100% supervision is already on your menu and it's a recipe for success. As the child ages you'll see the required amount of supervision decrease.
When dooger's ears move back that's a sure sign the attitude has changed and stopping the petting as you are already doing is smart. A firm NO! (if and only if you feel that this is aggression based) would come from me at the same time as this behaviour was happening and all petting and attention stops immediately. That said, a dog's ears can go back for different reasons as BD's link suggest. You are the best interpreter of dooger's behaviour.
Labs are known to be gentle but all dogs are animals and many of them have strong prey drives. Kids have jagged movements that can elicit predatory behaviours..but this should not happen happen with you right there watching dooger's every move.
Hope this may help and curious to know what other members suggest.