Based on the recent Bureau of Labor Statistics monthly update, total U.S. employment increased as many had anticipated: According to the ADP report, private non-farm payroll grew by 191k during March: In the last U.S. employment report, which was released today, April 4th, the total number of non-farm employees grew by 192,000. The main sectors that grew during March were in professional and business services and in wholesale trade but declined in information. The rate of unemployment, however, remained flat at 6.7%. The growth in employment was slightly higher than the natural growth of workforce. Since the rise in employment didn’t beat the expectations, the markets reaction to the employment numbers was positive for gold and silver. Other commodities prices also rally while the major stock markets are lightly falling.
The chart below shows the revised figures of the added number of non-farm employees in the labor market in recent years (up to March 2014). The non-farm payroll rose in February from +175k to +197k. For January, the employment was revised up from +129k to +144k. The combined added jobs in those months were 341k – roughly 37k more jobs than previously estimated. The revised figures for December and January suggest the employment situation in the U.S was closer to the numbers previously estimated.
As I have presented 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 higher than this threshold.
In March, the rate of U.S. unemployment remained unchanged at 6.7%. Some expected the rate to inch down to 6.6%. The current unemployment rate is 0.9 percent points lower than its rate in March 2012.
Moreover, the number of unemployed persons (10.5 million) didn’t change in March compared to the previous month. A closer look reveals that the number of unemployment rose by 27k, and the civilian labor force rose by 503k. This could suggest that the flat rate of unemployment was inline with the rise in number of people participating in the labor force. After all, the participation rate remained inched up to 63.2%.
Following this news, the USD/Yen exchange rate dropped; crude oil price rallied; the U.S stock market indexes are slightly declined; gold and silver prices bounced back.
As I have already stated in the recent gold and silver monthly outlook, historically, if the non-farm payrolls rise by more than the population growth rate (roughly 100k), gold and silver prices tended to decline. But if the number of employees rises by a lower pace than expected, this could pull up the prices of gold and silver. This time, the rise in employment was close to the forecasts but many still thought the labor would show better numbers this time.
The table below presents the correlation between the news of the U.S. non-farm payroll employment changes and the daily changes in gold and silver prices on the day of the U.S. labor report publication.