The U.S. economy added 215,000 jobs in July. What does it mean for the gold market?
The July jobs report was not overwhelming in strength. Total nonfarm payroll employment increased by 215,000, slightly below expectations. The number was also below June’s 223,000 and below 2014’s 260,000 monthly average. The unemployment rate was unchanged at 5.3 percent, while wages increased only by 0.2 percent. On an annual basis, this means only a 2.1 percent rise over the past year, implying the lack of any inflation pressure. The number of persons employed part time for economic reasons and the number of discouraged workers were little changed in July. The same goes for the participation rate, which stuck to a 38-year low of 62.6 percent in July. Gains occurred generally in services, since manufacturing employment only edged up, while mining employment continued to trend down in July. Moreover, there was again a divergence between the household survey and the establishment report. The latter report showed employment gains larger than the household survey did (a difference of 114,000 jobs).
Even though the July jobs report is rather mixed, it may be enough to keep the Fed on course for a September hike. The possible lift-off depends on the Fed’s definition of “some”. In the last policy statement, the FOMC members said that they need to see “some further improvement” in the labor market to raise interest rates. Some analyst believe that just maintaining the trend is not enough to provide that “some” improvement; however, investors interpreted the report as a sufficient foundation for the September hike. The odds of a rate increase at the September FOMC meeting increased several percentage points after the publication of the report. That is not very good for gold.
The take-home message is that the July job report was mixed, but enough for keeping the Fed on the path for an interest rate hike this year. It is not sure if the 215,000 jobs added may be considered solid gains, but this provides “some” further improvement in the labor market. Thus, the report reinforced the market expectations for a September hike, which is bad news for the gold market, because the anticipation of a monetary tightening is likely to prevent any significant rebound in the price of gold.
If you enjoyed the above analysis, we invite you to check out our other services. We focus on the fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals.
Thank you.
Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
Gold News Monitor
Gold Trading Alerts
Gold Market Overview
