The US labor force didn’t expand in August and remained flat compared with the increase in July: According to the recent U.S. employment report, which was published today, September 2nd by the Bureau of Labor Statistics regarding August 2011, the number of non-farm employees didn’t change during August compared with a revised increase of 85,000 during July and 20,000 during June. There were moderate increases mainly in the health care, but there were also drops in employment in information sector due to strikes.
The U.S. unemployment rate didn’t change during August and remained at 9.1% (as seen in the chart below).
Furthermore, the number of unemployed persons (14.0 million) slightly rose during August, while the labor force increased to 153.6 million.
As I have calculated in the past post, the average number of jobs needed to be created on a monthly scale to ward off the increase in rate of unemployment due to growth of the U.S. civilian labor force is at least 107,000 (see green line in the first chart above). This means that with no increase in employment, it will eventually drive the unemployment rate higher.
Despite this news, the Euro to US dollar exchange rate is currently traded slightly down.
Now let’s breakdown how this news could affect the commodities markets, including gold, silver and crude oil:
Gold market
As analyzed in the recent gold and silver prices outlook, historically, as the non-farm payrolls didn’t rise the gold and silver prices increased; this correlation was mostly due to the effect this news had on the US dollar (i.e. for bad news from labor report, usually weakens the US dollar and consequently pulled gold and silver prices down); in the August report, in which the news didn’t show an increase in labor market, this news could further cause an depreciation in the US dollar against major currencies and consequently help the rally of gold and silver prices. This news also rekindles the debate about the economic progress of the US economy and whether there will be an additional stimulus plan by the Fed.
Crude oil market
With this report, the U.S. economy shows some concerns regarding its labor force; this might reflect that the US economy isn’t entering a deep recession as some have speculated in the past few weeks, but also isn’t out of the woods just yet; therefore it also puts a damper on the growth of the US demand for oil, and consequently may drive crude oil prices down over speculation on this matter.
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