The U.S. labor force rose again during February: according to the recent U.S. employment report, which was published today, March 9th by the Bureau of Labor Statistics the number of non-farm employees increased by 227,000. The main sectors that rose during February were in professional and business services, health care, leisure, mining and manufacturing.
The chart below presents the revised figures of the number of non-farm employees added to the labor market during 2011 and 2012 (up to February). It shows that in the past three months the number of employees added were well above the 200k mark. As I have calculated in the past, the number of non-farm payroll employment needed to join the labor market on an average monthly scale to keep up with the growth of the U.S. civilian labor force is at least 107,000 (see red line in the chart below). This means that the increase in employment during February reaches this number.
Despite the rise in employment the rate of U.S. unemployment remained unchanged at 8.3%. The rate of unemployment is still at its lowest level in over two years in the past couple of months as seen in the chart below. The current unemployment rate is 1.5 percent points lower than its rate in November 2010.
Following this news currently, the Euro to US dollar exchange rate is trading sharply down along with the GBP/USD; crude oil price is slightly rising while gold price is declining.
Now let’s breakdown how this news might affect the direction of commodities prices, including the prices of gold and crude oil:
As I have already reviewed in the March gold price monthly report, historically, as the non-farm payrolls rose gold price tended to fall; this correlation was mostly due to the effect this news had on the U.S dollar; the news of the sharp increase in the U.S. labor force during February could consequently curb the recent rally of gold price. On the other hand, gold traders continue to raise the wagers on gold, and thus pushing gold price up.
The table below shows the correlation between the news of the U.S. non-farm payroll employment changes and the daily changes in gold and silver prices on the day of the U.S. labor report publication.
Crude Oil Market
The growth in the non-farm employment is a positive signal for the progress of the U.S. economy in regards to its work force; thus this news may also reflect an expected growth in U.S. demand for crude oil, and consequently may positively affect crude oil prices during today’s trading.
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