The Bureau of Labor Statistics published its monthly update: Total U.S. employment rose by a higher than expected rate – according to the ADP report, private non-farm payroll increased by 130k during October: The latest U.S. employment report, which was published today, November 8th, the total number of non-farm employees rose by 204,000. The main sectors that grew during October were in leisure and hospitality, retail trade, professional and technical services, manufacturing, and health care. The rate of unemployment inched up to 7.3%. The rise in employment exceeds the natural growth of workforce. Moreover since it was higher than anticipated, this news may have contributed to the tumble of precious metals prices. Other commodities prices and the major stock markets are also increasing.
The chart below presents the revised figures of the added number of non-farm employees in the labor market in recent years (up to October 2013). The non-farm payroll was revised up for August from +193k to +238k; For September it was revised up from +148k to +163k. The combined added jobs in those months were 401k – 60k more jobs than previously estimated. The revised figures for August and September suggest the employment situation in the U.S has done much better than it was previously estimated.
As I have examined in the past, the minimum number of non-farm payroll employment needed to maintain the employment unchanged (to compensate with the growth of the U.S. civilian work force) – is roughly more than 100k. So the recent sharp rise in number of jobs was much higher than its threshold.
The rate of U.S. unemployment inched up in October at 7.3%. 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 October 2012.
Further, the number of unemployed persons (11.3 million) remained little moved in October compared to the last month.
Following this news, currently, the Euro/USD exchange rate is falling; crude oil price is slightly rising; the U.S stock market indexes are also rising; 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:
As I have already pointed out in the recent gold and silver monthly forecast, historically, if the non-farm payrolls rise by more than the population growth rate (roughly 107k), gold and silver prices tended to decline. Moreover, if the number of employees rise by more than expected, this could also pull down the prices of gold and silver.
The table below presents 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.