The US labor force rose at a much faster pace than in the past couple of months, as the number of non-farm employees increased during July by 117,000 compared with an increase of 18,000 during June and 25,000 during May. The recent increase was mainly in the health care, manufacturing and mining sectors.
According to the recent U.S. employment report, which was published today, August 5th by the Bureau of Labor Statistics regarding July 2011 US labor, there was slight improvement compare to recent months.
Thus the U.S. unemployment rate didn’t change much and decreased by only 0.1 percent point during July, from 9.2% in June to 9.1% in July (as seen in the chart below).
Furthermore, the number of unemployed persons (13.9 million) slightly fell as well during July.
As I have calculated in the past post, the average number of jobs to be created each month should reach at least 107,000 in order to keep with the annual growth rate of the U.S. civilian labor force (see green line in the chart below). This means that these figures are slightly higher than the average natural growth rate of the labor force.
Despite the slightly good news, the Euro to US dollar exchange rate is currently traded up.
Now let’s breakdown how this news could affect the commodities markets:
Gold market
As analyzed in the recent gold and silver prices outlook, historically, as the non-farm payrolls inclined the gold and silver prices declined; this correlation was mostly due to the effect this news had on the US dollar (i.e. for good news from labor report, usually strengthen the US dollar and consequently pulled gold and silver prices down); in this recent report, in which the news did show some improvement this should curb the rally of gold and silver prices; in any case, it’s likely that gold and silver prices won’t react much to this news.
Crude oil market
The U.S. economy showed a slight improvement in the labor force during July; this might reflect indirectly into the changes in the US demand for crude oil and natural gas in the industry market. Historically there was little correlation between the new about the labor report and the daily changes in crude oil prices. There might be some long term effects, i.e. as the US economy pulls up from its recession, the US demand for oil might also incline, but again there is little evidence to support any short term effects; this report could serve more as an indicator of the progress of the US economy’s and potential growth in crude oil demand.
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