U.S NF Payroll Spike by 288k in April | Gold & Silver Rise

According to the recent Bureau of Labor Statistics monthly report, total U.S. employment augmented by a higher than anticipated pace: According to the ADP report, private non-farm payroll grew by 220k during April: In the recent U.S. employment report, which was released yesterday, May 2nd, the total number of non-farm employees increased by 288,000. The main sectors that grew during April were in professional and business services, retail trade, food services and drinking places, and construction. The rate of unemployment also dropped to 6.3%. The growth in employment was higher than the natural growth of workforce. Even though the rise in employment beat the expectations, the markets reaction to the employment numbers wasn’t too positive as equities markets edged down and precious metals rallied. Other commodities prices also rose. 

The chart below shows the revised figures of the added number of non-farm employees in the labor market in past years (up to April 2014). The non-farm payroll rose in March from +192k to +203k. For February, the employment was revised up from +197k to +222k. The combined added jobs in those months were 425k – roughly 36k more jobs than previously estimated. The revised figures for February and March suggest the employment situation in the U.S was slightly higher than 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 around 100k. So the recent rise in number of jobs was much higher than this threshold.

U.S. Nonfarm payroll employment up to 2014  May 3In April, the rate of U.S. unemployment dropped to 6.3%. Some analysts estimated the rate to edge down to 6.6%. The current unemployment rate is 1.2 percent points lower than its rate in April 2012.

Further, the number of unemployed persons (9.8 million) dropped in April compared to the previous month. A closer look reveals that the number of unemployment plummeted by 733k, but the civilian labor force also dropped by 806k. This could suggest that the fall in unemployment was inline with the fall in the number of people participating in the labor force. After all, the participation rate declined by 0.4 percentage points to 62.8%.

Following this news, the USD/Yen exchange rate declined; crude oil price rose; the U.S stock market indexes are slightly slipped; gold and silver prices rallied.

As I have already stated in the recent gold and silver monthly report, historically, if the non-farm payrolls increase by a higher than the population growth rate (roughly 100k), gold and silver prices tend to fall. Moreover, if the number of employees increases by a higher than expected pace, this could drag further down the prices of gold and silver. This time, the rise in employment was higher than forecasts and yet precious metals resumed their rally. The sharp fall in the civilian labor force may have contributed to impact this report had on the markets.

The table below shows the correlation between the news of the U.S. non-farm payroll employment changes and the daily changes in gold and silver priceson the day of the U.S. labor report publication. These correlations, however, don’t always hold up, as indicated in the recent report.

U.S.Labor Reports gold price and silver prices May 3 2014For further reading: