The April employment report was published on Friday. What does it mean for the U.S. economy and the gold market?

According to the Bureau of Labor Statistics, total nonfarm payroll employment increased by 223,000 in April, roughly in line with expectations, and by much more than in March. Thus, the pace of job growth rebounded last month after a steep decline in March, however, the details are gloomier.

First, the March payrolls were revised to show only 85,000 jobs created, the smallest number since June 2012, down from the original 126,000 estimate. It means that over the past three months, job gains have averaged 191,000 per month, significantly down from 260,000 in 2014 (and down from the 324,000 pace in the fourth quarter of 2014).

Second, the unemployment rate, participation rate and average hourly pay were essentially unchanged. The unemployment rate remained at 5.4 percent, while the participation rate rose by 0.1 percent to 62.8 percent. The practically unchanged participation rate suggests that there will be no significant wage growth in the future. The average hourly pay inched up only 0.1 percent in April. The sluggish wage growth means that the June Fed’s interest rates hike is now probably off the table, with September being the most likely lift-off date now (however, investors do not believe in a hike earlier than in December). This is perhaps why gold edged higher after the April U.S. jobs data was released.

Third, the household survey painted a far less optimistic picture, because the entire increase in employment was part-time employment. Some analysts also say that virtually all job gains have gone to older workers (those 55 and over), while wage growth is practically limited to supervisory employees, whose salaries are linked to the rising prices of equities. Moreover, the BLS said that only 3,300 oil and gas extraction jobs were lost in April, while according to the latest monthly report on job layoffs from the global outplacement consultancy Challenger, Gray & Christmas, there were 20,675 layoffs linked to the energy industry.

Summing up, the April U.S. employment report was a mixed bag. The pace of job gains accelerated after a weak March, however, the sharp revision of March number puts into question the early interest rates hike this year, which should be supportive for the gold prices.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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