U.S Employment Edged Up by Only 74k in December | Gold & Silver Bounce Back

The Bureau of Labor Statistics published its monthly update: Total U.S. employment didn’t rise as many had anticipated: Based on the ADP update, private non-farm payroll rose by 238k during December: The recent U.S. employment report, which was published yesterday, January 10th, the total number of non-farm employees rose by only 74,000. The main sectors that grew during December were in retail trade and wholesale trade; conversely, the information sector was down. The rate of unemployment, however, dropped again to 6.7%. The growth in employment didn’t exceed the natural growth of workforce. Despite the drop in unemployment, the markets reaction to the low employment numbers were enough to pull back up the prices of gold and silver on Friday. Other commodities prices and the major stock markets also bounced back.

The chart below presents the revised figures of the added number of non-farm employees in the labor market in recent years (up to December 2013). The non-farm payroll was revised up for November from +203k to +241k. For October, there was no revision. The combined added jobs in those months were 441k – roughly 38k more jobs than previously estimated. The revised figures for October and November suggest the employment situation in the U.S was close to the numbers previously estimated.

As I have showed in the past, the minimum number of non-farm payroll employment needed to maintain the employment unchanged (to compensate with the growth of the U.S. civilian work force) – is roughly more than 100k. So the recent increase in number of jobs was lower than its threshold.

U.S. Nonfarm payroll employment up to 2014  January 10

In December, the rate of U.S. unemployment fell to 6.7%. The rate of unemployment is at its lowest since mid-2008. The current unemployment rate is 1.1 percent points lower than its rate in December 2012.

Further, the number of unemployed persons (10.3 million) declined in December compared to the previous month.  A closer look reveals that the number of unemployment dropped by 490k, while the civilian labor force declined by 347k. This could suggest that part of the fall in unemployment is due to fewer people participating in the labor force. After all, the participation rate inched down to 62.8%.

Following this news, the USD/Yen exchange rate fell; crude oil price rose; the U.S stock market indexes are also rallied; gold and silver prices bounced back.

As I have already claimed in the recent gold and silver monthly outlook, historically, if the non-farm payrolls rise by less than the population growth rate (roughly 100k), gold and silver prices tended to rise. Moreover, if the number of employees rise by less than expected, this could also pull up the prices of gold and silver.

The table below shows the correlation between the news of the U.S. non-farm payroll employment changes and the daily shifts in gold and silver prices on the day of the U.S. labor report publication.

U.S.Labor Reports gold price and silver prices January 10 2014

For further reading: