Gold Prices Shake Off 313K New Jobs In February; Wage Growth Disappoints
The Bureau of Labor Statistics said 313,000 jobs were created in February. Economists were expecting to see job gains of around 200,000. Not only did February job gains beat expectations, strong revisions were reported in December and January. December's data was revised up to 175,000 jobs, up from the previous estimate of 160,000. January's data was revised up to 239,000, up from the previous estimate of 200,000.
"After revisions, job gains have averaged 242,000 over the last 3 months," the report said.
At the same time, the unemployment rate held steady at 4.1%, which was higher than expectations with forecasts calling for a drop to 4.0%.
Gold prices were seeing some profit taking ahead of the report, and have pushed only slightly lower in initial reaction. April gold futures last traded at $1,314.50 an ounce, down 0.53% on the day.
According to some analysts, gold is seeing little reaction to the stronger-than-expected employment data because wages continue to disappoint market expectations. The report said that last month average hourly earnings increased by four cents or 0.1% to $26.75. Markets were expecting to see an increase of 0.2%.
Annually the report said that wages increased 2.6%.
Some economists have noted that the muted wage growth could encourage the dovish members in the Federal Reserve to call for looser monetary policy. There are members on the central bank committee who want to wait for inflation to pick up before they raise interest rates again.
"February data confirmed our suspicion that last month's strong wage figure was largely an illusion, with a tame 0.1% gain in the latest month taking the annual rate back close to the average of the past couple of years," said Andrew Grantham, senior economist at CIBC World Markets. "the wage numbers should allay fears of a quick pick up in inflation, and as such we still see the Fed hiking interest rates three times this year ie. the same pace as that seen in 2017."
Paul Ashworth, chief U.S. economist at Capital Economists said that he is not paying much attention to wage data. He explained that anecdotal evidence reports severe labor shortages through many industry and this will ultimately lead to high wages.
He noted that February’s job gains was the biggest in 18 months.
“This is more evidence that the Fed will need to hike four times this year, starting later this month,” he said.