U.S Employment Grew by 163k in July


The U.S. employment rose y a higher rate than many had anticipated during July: according to the recent U.S. employment report, which was published today, August 3rd by the Bureau of Labor Statistics the number of non-farm employees grew by 163,000. The main sectors that expanded during July were in Professional and business services, food services and drinking places, and manufacturing. The rate of unemployment remained nearly unchanged at 8.3%. Gold and Silver prices are rising along with other commodities rates.

The chart below shows the revised figures of the number of non-farm employees added to the labor market during recent years (up to July 2012). The change in non-farm payroll was revised up for May from +77k to +87k; For June it was revised from +80k to +64. Keep in mind that the recent growth could also be related to a seasonality effect (during June 2011 were also very low numbers of added jobs).

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 work force is at least 107k (see red line in the chart below). This means that the recent gain in employment during July met this number.

U.S. Nonfarm payroll employment up to 2012 August 3


Despite the higher than expected increase in employment the rate of U.S. unemployment remained nearly unchanged in July at 8.3%. The rate of unemployment is still at its lowest level in recent years. The current unemployment rate is nearly 1.5 percent points lower than its rate in November 2010.

Furthermore, the number of unemployed persons (12.8 million) was essentially unchanged during July.

Following this news currently, the Euro to US dollar exchange rate is trading sharply up along with the GBP/USD; crude oil price is hiking along with U.S stock market indexes; gold price is also rising.

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 prices monthly report, historically, as the non-farm payrolls expand by at least the population growth rate (roughly 107k), gold price tended to fall; this correlation was mostly due to the effect this news has had on the speculation of another QE program by the Fed. But in recent months as the chances of the Federal Reserve introducing QE3 in near future have declined, the negative relation between bullion rates and the employment growth has changed direction. The relation of the precious metals market with other markets including commodities and stocks seems to prevail. I.e. as the prices of commodities (oil) and stocks rise, gold and silver also tend to trade up.

Crude Oil Market

The recent rise in the non-farm employment is a positive sign for the recovery of the U.S. economy from the perspective of the U.S’s work force. These numbers might be a seasonal effect but if they will continue it could help rally the markets as it signals an expected rise in U.S. demand for crude oil, and consequently may continue to pressure up crude oil prices during today’s trading.

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