The Bureau of Labor Statistics published it monthly update: U.S. employment increased again but by a lower than expected pace – according to the ADP estimate, the non-farm payroll rose by 200k during May: The recent U.S. employment report, which was published today, August 2nd, the number of non-farm employees increased by 162,000. The main sectors that grew during July were in retail trade, food services and drinking places, financial activities, and wholesale trade. The rate of unemployment slipped to 7.4%. Gold and silver prices are currently slightly falling while other commodities prices and the major stock markets are declining.
The chart below shows the revised figures of the number of non-farm employees grew in the labor market in recent years (up to July 2013). The non-farm payroll was revised up for May from +195k to +176k; For June it was revised from +195k to +188k. The combined added jobs in those months were 364k – 26k fewer jobs than previously estimated. The revised figures for May and June suggest the employment situation in the U.S hasn’t improved.
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 slipped in July at 7.4%. The rate of unemployment is at its lowest since mid-2008 but hasn’t changed much since November 2012. The current unemployment rate is 0.9 percent points lower than its rate in July 2012.
Moreover, the number of unemployed persons (11.5 million) was also lower in July compared to last month.
Following this news, currently, the Euro/USD exchange rate is rising; crude oil price is falling; the U.S stock market indexes are also slightly declining; gold and silver prices are slightly decreasing.
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 stated in the recent gold and silver weekly outlook, historically, if the non-farm payrolls rise by more than the population growth rate (roughly 107k), gold and silver prices tended to slide; 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 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 shows the negative correlations between the U.S employment and daily shifts of bullion prices.
Crude Oil Market
The recent rally in the non-farm employment is lower than many had expected; conversely, the employment grew by well above the 100k mark, which is raises the changes of the Fed tapering its asset purchase program in the coming months. Nonetheless, the disappointing numbers compared to the expectations may have dragged down oil prices.
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