According to the recent Bureau of Labor Statistics monthly report, total U.S. employment didn’t rise as many had anticipated: Based on the ADP update, private non-farm payroll rose by 175k during January: The recent U.S. employment report, which was published today, February 7th, the total number of non-farm employees increased by only 113,000. The main sectors that grew during January were in construction, manufacturing, wholesale trade, and mining. The rate of unemployment, however, slipped again to 6.6%. The growth in employment was inline with the natural growth of workforce. Despite the slight fall in unemployment, the markets reaction to the low employment numbers was enough to pull up the prices of gold and silver. Other commodities prices and the major stock markets also rally.
The chart below shows the revised figures of the added number of non-farm employees in the labor market in recent years (up to January 2014). The non-farm payroll was little changed up for December from +74k to +75k. For November, the employment was revised up from +241k to +274k. The combined added jobs in those months were 349k – roughly 34k more jobs than previously estimated. The revised figures for November and December suggest the employment situation in the U.S was close to the numbers previously estimated.
As I have showed 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 increase in number of jobs was close to this threshold.
In January, the rate of U.S. unemployment inched down to 6.6%. The rate of unemployment is at its lowest since mid-2008. The current unemployment rate is 1.3 percent points lower than its rate in January 2012.
Further, the number of unemployed persons (10.2 million) slipped in January compared to the previous month. A closer look reveals that the number of unemployment dropped by 115k, while the civilian labor force rose by 523k. This could suggest that the drop in unemployment was despite the higher number of people participating in the labor force. After all, the participation rate inched up to 63%.
Following this news, the USD/Yen exchange rate slightly rises; crude oil price also increasing; the U.S stock market indexes are also recovering; gold and silver prices are currently trading slightly up.
As I have already stated in the last gold and silver monthly outlook, historically, if the non-farm payrolls rise by less than the population growth rate (roughly 100k), gold and silver prices tended to rise. Moreover, if the number of employees rise by less than expected, this could also pull up the prices of gold and silver.
The table below presents the correlation between the news of the U.S. non-farm payroll employment changes and the daily shifts in gold and silver prices on the day of the U.S. labor report publication.