Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will US Labor Market Recovery Sink Gold?

Commodities / Gold & Silver 2020 Jun 12, 2020 - 05:17 PM GMT

By: Arkadiusz_Sieron


The recent job report is not reliable, but it shows recovery in the US labor market. The situation is still bad, but optimism could triumph for now, which is bad for gold.  

On Friday, the Bureau of Labor Services released the newest edition of the Employment Situation Report. The publication shows that the US economy regained 2.5 million jobs in May, constituting the biggest nonfarm payroll surprise in history. Indeed, the economists polled by MarketWatch had forecast a loss of 7.25 million jobs. The rebound is presented in the chart below.


Meanwhile, the analysts expected that the unemployment rate would rise to 19 percent from 14.7 percent in April, but it declined to 13.3 percent, as one can see in the next chart. The report, if reliable, signals that the postpandemic recovery has begun, as the charts below show.

Not surprisingly, the stock market reacted euphorically, with the S&P 500 Index jumping more than 2.5 percent on Friday, while the price of gold dropped below $1,700.

But is the situation in the US labor market indeed so rosy? Not quite. After all, even if the data reported by the BLS is reliable, the number of working Americans is about 20 million lower than before the pandemic, and the unemployment rate is still at the highest level since the Great Depression. So, there is still a long way to go until the labor market returns to normalcy.

But it’s not even the case that the recovery has really begun. You see, the report is not reliable. And the BLS admitted itself, writing that

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported.

In plain English, it means that the BLS incorrectly described the job status of millions of people and without such an error, the unemployment rate would be not 13.3 percent, but 16.3 percent. So instead of decreasing – suggesting the start of the recovery – it would rise further since April.

The ADP report released earlier in the week, based on data directly from the employers themselves, showed almost 3 million more lost jobs, not a gain in jobs. The number was also better than forecasts, but significantly worse than the BLS data.

Initial claims also do not indicate the rebound in the US labor market. As the chart below shows, each week since the outbreak of the pandemic, a few millions of Americans applied for the unemployment benefits – and more than 42 million in total wanted to become unemployed, implying a bleaker situation in the US labor market.

Implications for Gold

What does the recent Employment Situation Report imply for the gold market? The headlines are very positive, implying that the recovery started earlier than expected. It should spur more optimism among investors, which could further fuel the rally in the stock market, while weakening the safe-haven demand for gold.

However, the BLS data is not completely reliable and the real unemployment rate likely exceeds 16 percent. The government wrongly classified millions of people as “employed but not at work” instead of “unemployed on temporary layoff”. Hence, the labor market is still in a terrible spot, so investors should remain cautious. 

In the short run, the optimistic narrative could triumph in the marketplace. After all, the reopening of state economies in May should start the economic recovery. But we will see what the more distant future will bring. The second wave of infections is still possible and after all these riots in the US make it even more probable. Nevertheless, the risk appetite should strengthen now with the positive (although partially fake) job report, which is bad news for the gold market

Thank you.

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


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

© 2005-2022 - 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