The Bureau of Labor Statistics came out with it monthly report: Total U.S. employment rose at a lower than expected rate – according to the ADP report, private non-farm payroll increased by 176k during August: The latest U.S. employment report, which was published today, September 6th, the total number of non-farm employees rose by 169,000. The main sectors that grew during August were in retail trade and health care. The rate of unemployment inched down to 7.3%. These figures aren’t that bad as they exceed the natural growth of workforce, but these numbers are slightly lower than anticipated, which may contribute to the rally of precious metals. Gold and silver prices are currently rising; other commodities prices and the major stock markets are also increasing.
The chart below presents the revised figures of the number of non-farm employees grew in the labor market in recent years (up to August 2013). The non-farm payroll was revised down for June from +188k to +172k; For July it was revised from +162k to +104k. The combined added jobs in those months were 276k – 74k fewer jobs than previously estimated. The revised figures for June and July suggest the employment situation in the U.S hasn’t improved as much as it was previously estimated.
As I have examined 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 August 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 0.8 percent points lower than its rate in August 2012.
Moreover, the number of unemployed persons (11.3 million) fell in August compared to the previous month.
Following this news, currently, the Euro/USD exchange rate is falling; crude oil price is rising; the U.S stock market indexes are also slightly increasing; gold and silver prices are 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 latest gold and silver monthly outlook, historically, if the non-farm payrolls rise by more than the population growth rate (roughly 107k), gold and silver prices tended to decline; 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 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. The table below shows the negative correlations between the U.S employment and daily changes of precious metals prices.
Crude Oil Market
The recent rise in the non-farm employment is lower than expected. But the employment expanded by more than 100k mark. This means the expansion of the U.S job market may suggest the demand for oil will also rise, which will help pull up oil prices.
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