The U.S. labor force sharply grew again during December: according to the recent U.S. employment report, which was published today, January 6th by the Bureau of Labor Statistics the number of non-farm employees grew by 200,000 – the highest increase since September 2011. The main sectors that increased during December were in transportation, warehousing retail sales, manufacturing, mining and health care.
Due to the growth in employment the rate of U.S. unemployment fell by 0.1 percent point from 8.6% to 8.5% (as seen in the chart below). The rate of unemployment reached its lowest level in over two years and fell by 0.6 percent points in the past six months.
Furthermore, the number of unemployed persons (13.1 million) sharply declined in December by 17 thousand from November.
As I have calculated in the past post, the average number of jobs needed to be created on an average monthly scale to keep up with the growth of the U.S. civilian labor force is at least 107,000 (see green line in the first chart above). This means that the increase in employment during November more than reaches this figure of containing the current employment with respect to the labor force’s natural growth.
Following this news currently, the Euro to US dollar exchange rate is traded slightly up along with the GBP/USD, and crude oil prices and gold price are slightly rising.
Now let’s breakdown how this news could affect the commodities markets, including gold and crude oil:
As I have already analyzed in the recent gold price monthly forecast report, historically, as the non-farm payrolls increased gold price tended to decrease; this correlation was mostly due to the effect this news had on the U.S dollar; the news of the sharp growth in the U.S. labor force during December could consequently reverse the recent upward trend of gold price.
The table below shows the correlation between the news of the U.S. labor report and the daily changes in gold and silver prices.
The growth in the non-farm employment is a positive sign for the growth of the U.S. economy from its labor force standpoint and provides some cause for optimism; this might signal that the U.S. economy is starting to slowly pull out of its economic slowdown; thus this news may also reflect an expected growth in U.S. demand for crude oil, and consequently may pressure crude oil prices to increase.
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