Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Employment Data, Rate Cut Speculations and Gold

Commodities / Gold & Silver 2019 Oct 10, 2019 - 02:41 PM GMT

By: Arkadiusz_Sieron

Commodities

If you look at the manufacturing data only, the relative strength of the jobs figures surprised. Another positive development were the upward revisions for August and July. The unemployment rate again dropped, this time to 3.5 percent. What will that mean for the Fed and gold?

September Payrolls Slow Down, but Unemployment Rate Drops Anyway

The U.S. created only 136,000 jobs in September, following an increase of 168,000 in August (after an upward revision). The nonfarm payrolls were short of the analysts’ forecast of 150,000. The gains were widespread, spearheaded by education and health services (+40,000) and professional and business services (+34,000). Manufacturing, which is in recession, and retail trade, which faces overcapacity, cut jobs.


However, the weak headline number was accompanied by upward revisions in August and July. Counting these, employment gains in these two months combined were 45,000 higher than previously reported. Consequently, the job gains have averaged 157,000 per month over the last three months, and 161,000 so far this year, still significantly below the average monthly gain of 223,000 in 2018.

Although the pace of hiring has slowed (see the chart below), the U.S. economy is still creating jobs at a reasonable pace. Indeed, the job creation pushed the unemployment rate down, from 3.7 to 3.5 percent, the lowest level since 1969. It means that the U.S. labor market is likely to further contribute to the longest economic expansion on record, at least for the time being.

Chart 1: U.S. nonfarm payrolls (red bars, left axis, change in thousands of persons) and the unemployment rate (green line, right axis, %) from September 2014 to September 2019.


The labor force participation and the employment-population ratio were little changed. It means that the decrease in the unemployment rate was not caused by people dropping from the labor market. Meanwhile, the average hourly earnings for all employees on private nonfarm payrolls have increased 2.9 percent over the last twelve months, which is a decline from the August 3.2 percent rise. This slowdown in the wage inflation should not significantly impact the Fed’s stance, however.

Hence, the U.S. labor market shows resilience in general. The recession in manufacturing sector has not translated into higher unemployment rate, at least not yet. As a result, the overall economy is still doing relatively well, which is bad news for gold prices.

Implications for Gold

The latest Employment Situation Report does not support expectations of another interest rate cut in October. The Fed has reduced the federal funds rate twice this year as an insurance against the possible recession. The U.S. labor market does not signal an economic downturn and does not justify a further interest rate cut. That’s not the conclusion that the gold bulls would like to hear. It seems that they need some new, positive fundamental developments to take prices higher.

However, the case is not lost. The precious metals investors should remember that the unemployment rate is more of a lagging rather than a leading indicator. So any potential economic weakness will be revealed in the employment report with a certain lag.

And the Fed may still deliver another interest rate cut, the solid employment situation nonetheless. After all, both the 2019 easing moves occurred not because of, but despite the signals coming from the labor market. The market odds of the 25-basis point interest rate cut in October stand at almost 75 percent! Tomorrow, the minutes from the recent FOMC meeting will be published – and they could provide some insights into the Committee’s thinking. If the minutes are more dovish than expected, the yellow metal should shine. But if they are more hawkish than expected, the gold prices could drop.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron

Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules