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Gold Largely Unchanged As U.S. Payrolls Fall 33,000 On Disruptions From Hurricanes

Kitco News

(Kitco News) - Gold prices were little changed after the U.S. economy saw a decline in payrolls for the first time since 2010 in September, with Hurricanes Harvey and Irma negatively impacting the employment situation in the country.

The Bureau of Labor Statistics said U.S. payrolls declined by 33,000 in September. The monthly figure was a big miss, as economists were projecting to see a gain of at least 90,000 positions.

At the same time, the U.S. unemployment rate dropped to 4.2%, marking the lowest level February 2001.

The report specified that Hurricane Irma made landfall in Florida during the reference period for both the establishment and household surveys, while Hurricane Harvey made landfall in Texas prior to the September reference periods.

“Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September,” according to the monthly release.

Gold was not impacted by the data one way or the other, with December Comex gold last seen trading at $1,269.10, down 0.32% on the day. Prior to the release, gold prices were weaker as “the bull market in equities has funneled money away from the safe-haven gold market,” according to Kitco’s senior analyst Jim Wyckoff.

The U.S. Bureau of Labor Statistics also revised the previous month’s number up to 169,000 from 156,000 originally reported for August.

“A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey,” the report said when describing September’s data.

Meanwhile, wages, another key element in the report, came in above expectations in September. “In September, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents to $26.55,” the report said. In the last 12 months wages have grown 2.9%.

Economists tried to look past some of the temporary noise created by the hurricanes and focus on the underlying trends.

“Overall, the hurricanes impacts will make it difficult for markets to find a clear message, but the strong wage data should tip the scales towards a stronger dollar and higher yields,” said Royce Mendes, senior economist at CIBC Captial Markets.

Meanwhile, Capital Economics’ chief U.S. economist Paul Ashworth said that the Federal Reserve and the markets will just ignore this report since a recovery is inevitable.

“If past-storms, particularly Katrina, are any guide, employment will rebound markedly over the next few months. The drop in the unemployment rate might persist, however, with consumer and small business surveys both pointing to a drop in the unemployment rate to nearer 4% for some time,” Ashworth noted.

Yet, the jobs data definitely impacted market expectations for Fed’s future interest rate hikes. CME Fed Watch Tool is now showing that investors are pricing in a 96.7% chance of a 25 basis-point hike in December, up from 86.7% registered prior to the release.

Earlier this week, traders digested slightly better-than-expected ADP national employment report, which showed that U.S. firms created 135,000 jobs in September, down from August’s downwardly revised 228,000.

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