Gold price struggling around $1,720 after 20.5 million jobs reported lost in April
Editor's Note: The article was updated to reflect weaker gold prices in delayed reaction to April nonfarm payrolls data.(Kitco News) - The gold market is struggling to find some momentum as the labor market, while significantly weakened by the COVID-19 pandemic, was in better shape than expected last month.
Gold prices are hovering below $1,720 an ounce, Friday, after the Bureau of Labor Statistics said 20.5 million jobs were lost in April. However, the data beat expectations; according to consensus forecasts, economists were expecting to see job losses of 22 million.
Jim Wyckoff, senior technical analyst at Kitco.com said that gold is not seeing much movement this morning following the employment data because a lot of this bad news was already priced into to markets. “Weekly U.S. jobless claims reports the past few weeks actually show the U.S. workforce has lost over 30 million jobs in less than two months,” he said.
Economists noted that in a single month the U.S. economy has lost most of the jobs created in the last decade after the 2008 financial crisis.
"Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality," the report said.
June gold futures last traded at 1,723 an ounce, down 0.18% on the day in initial reaction to the employment numbers.
The unemployment rate rose to 14.7%. According to consensus forecasts, economists were looking for a reading around 16%.
Looking at wages, the report said that average hourly earnings increased by $1.34 to $30.01. Wages increased a whopping 4.7% last month; economists were expecting to see a 0.5% increase in wages.
However, the report noted that the wage growth was not a positive factor for the labor market.
“The increases in average hourly earnings largely reflect the substantial job loss among lower-paid workers; this change, along with earnings increases, put upward pressure on the average hourly earnings estimates,” the report said.
Andrew Grantham, senior economist at CIBC, said that however bad the data was, it was not enough to underscore the damage done to the U.S. economy and labor market.
“The drop in non-farm payrolls and rise in unemployment rate were historically bad, as expected. Unfortunately, if anything both understate the weakening seen in the labour market as social distancing measures to fight the COVID-19 outbreak brought many sectors to a standstill,” he said.
Grantham added that he paid close attention to hours works in the latest employment data, which don’t bode well for economic growth in the second quarter.
“The sharp decline in aggregate working hours in today's report confirms that the hit from COVID-19 to Q2 GDP will be severe, and we currently forecast a contraction of around 40% in annualized terms.