The U.S. employment increased again by a higher than expected pace – according to the ADP estimate, the non-farm payroll rose by 135k during April: Based on the latest U.S. employment report, which was published today, June 7th by the Bureau of Labor Statistics the number of non-farm employees increased by 175,000. The main sectors that grew during May were in professional and business services, food services and drinking places, and retail trade. The rate of unemployment inched up to 7.6%. Gold and silver prices are currently tumbling down while other commodities prices and the major stock markets are pulling up.
The chart below shows the revised figures of the number of non-farm employees expanded in the labor market during the past few years (up to May 2013). The change in non-farm payroll was revised up for March from +138k to +142k; For April it was revised from +165k to +149k. The combined added jobs in those months were 291k – 12k fewer than previously estimated. The revised figures for March and April suggest the employment situation in the U.S hasn’t changed by much than previously estimated.
As I have analyzed in the past, the minimum number of non-farm payroll employment needed to maintain the rate of unemployment unchanged (to compensate with the growth of the U.S. civilian work force) is roughly 100k. So the recent rise in number of jobs was higher than this threshold.
The rate of U.S. unemployment inched up in May to 7.6%. The rate of unemployment is at its lowest since mid-2008 but hasn’t changed much since November 2012. The current unemployment rate is 0.6 percent points lower than its rate in May 2012.
Moreover, the number of unemployed persons (11.8 million) was also almost unchanged in May compared to the previous month.
Following this news, currently, the Euro/USD exchange rate is slightly falling; crude oil price is rising; the U.S stock market indexes are also increasing; gold and silver prices are tumbling down.
Now let’s breakdown how this news might affect the direction of commodities prices, including the prices of gold and crude oil:
Gold Market
As I have already pointed out in the latest gold and silver monthly outlook, historically, if the non-farm payrolls increase by more than the population growth rate (roughly 107k), gold and silver prices tended to fall; this correlation was mostly due to the effect this news has had on the speculation of the Fed may taper its QE3 program as the U.S economy is slowly recovering.
The table below presents 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. The table below shows the negative correlations between the U.S employment and daily shifts of precious metals prices.
Crude Oil Market
The recent increase in the non-farm employment is higher than many had expected; moreover, the employment grew by well above the 100k mark, which is a positive sign for the growth of the U.S. economy from the perspective of the U.S employment. This could suggest the price of oil may further rise.
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