Gold prices drop after 4.8 million U.S. jobs created in June
The gold market is under pressure, falling below critical initial support levels following stronger than expected labor market data for June.
Gold prices are hovering around $1,780 an ounce, Thursday, after the Bureau of Labor Statistics said 4.8 million jobs were created in June. The data significantly beat expectations; according to consensus forecasts, economists were expecting to see job gains of around 3 million.
August gold futures last traded at $1,773 an ounce, down 0.39% on the day, in initial reaction to the employment numbers.
The unemployment rate also fell more than expected, dropping to 11.1%. According to consensus forecasts, economists were looking for a reading around 12.4%. The unemployment rate is down sharply from the April high of 14.7%.
"These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it," the report said. "In June, employment in leisure and hospitality rose sharply."
While June’s job gains are the biggest on record, the labor market still has a massive gap to fill after more than 20 million jobs were lost as the economy ground to a halt because of the coronavirus pandemic.
"Wven with the gain in June, payrolls have only recouped about a third of the jobs lost over March and April," said Andrew Grantham, senior economist at CIBC.
In its revisions, the report said that in April 20.8 million people lost their jobs that month, up from the previous estimate of 20.7 million. However, May’s employment data was revised up to 2.7 million jobs created, compared to the initial estimate of 2.5 million.
Although June employment was better than expected, creating more hope for a sharp recovery from the economic devistation caused by the COVID-19 pandemic, Grantham said that that there is still a lot of uncertainty in the marketplace.
"Given that Covid-19 cases have been rising again in some parts of the country, resulting in the delaying/reversal of reopening plans, even the partial rebound in jobs during May and June could be viewed as too much, too soon, relative to the virus spread," he said.
Michael Pearce, senior U.S. economist at Capital Economics, also said that he expects future jobgrowth to slow as the virus continues to spread unabated.
While the headline data was stronger than expected, some economists note that wage growth is a concern. The report said average hourly wages dropped more than expected in June, falling 1.2% or 35 cents to $29.37, down compared to May’s drop of 0.8%.
“The decreases in average hourly earnings largely reflect job gains among lower-paid workers," the report said.
Looking at the mining sector, the report said that 10,000 jobs were lost last month, however, most of those jobs were in support activities.
“Mining employment is down by 123,000 since a recent peak in January 2019, although nearly three-fourths of the decline has occurred since February 2020,” the report said.
The employment data is being released a day early because markets and the government is closed Friday for the July 4 Independance Day holiday.