The Bureau of Labor Statistics published its monthly report: Total U.S. employment increased at a lower than expected rate – based on the ADP report, private non-farm payroll increased by 166k during September: The recent U.S. employment report, which was published today, October 22nd, the total number of non-farm employees rose by 148,000. The main sectors that grew during September were in construction, wholesale trade, and transportation and warehousing. The rate of unemployment edged down to 7.2%. The rise in employment exceeds the natural growth of workforce. But since it was lower than anticipated, this news may have contributed to the rise of precious metals prices. Gold and silver prices are currently increasing; other commodities prices and the major stock markets are also rising.
The chart below shows the revised figures of the number of non-farm employees grew in the labor market in recent years (up to September 2013). The non-farm payroll was revised down for July from +104k to +89k; For August it was revised up from +169k to +193k. The combined added jobs in those months were 276k – 74k fewer jobs than previously estimated. The revised figures for July and August suggest the employment situation in the U.S hasn’t changed as much as it was previously estimated.
As I have analyzed in the past, the minimum number of non-farm payroll employment needed to maintain the rate of unemployment hasn’t changed (to compensate with the growth of the U.S. civilian work force) – roughly more than 100k. So the recent increase in number of jobs was higher than this threshold. But since the expectations were higher than that, this news is slightly less positive.
The rate of U.S. unemployment inched down in September at 7.2%. The rate of unemployment is at its lowest since mid-2008 but hasn’t moved much since November 2012. The current unemployment rate is 0.6 percent points lower than its rate in September 2012.
Moreover, the number of unemployed persons (11.3 million) remained little changed in September compared to the previous month.
Following this news, currently, the Euro/USD exchange rate is rising; crude oil price is increasing; the U.S stock market indexes are also slightly rising; gold and silver prices are recovering.
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 recent 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. Moreover, if the number of employees rise by less than expected, this could pressure up the prices of gold and silver.
The table below shows the correlation between the news of the U.S. non-farm payroll employment shifts and the daily changes in gold and silver prices on the day of the U.S. labor report publication. The table below presents 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 lower than expected. But the employment expanded by more than 100k. This means the expansion of the U.S labor market may suggest the demand for oil will also rise, which will help pull up oil prices.
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