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Gold prices push higher after U.S. economy created 559K jobs in May, missing expectations

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(Kitco News) - Gold prices are pushing deeper into positive territory as the U.S. economy created fewer jobs than expected in May.

Friday, the Bureau of Labor Statistics said 559,000 jobs were created in last month; economists were expecting to see job gains of around 645,000.

Meanwhile, the unemployment rate came in at 5.8%, down compared to April's level at 6.1%; consensus forecasts were calling for a reading of 5.9%.

Gold prices saw some modest gains ahead of the report and have jumped higher in initial reaction to the weaker-than-expected employment numbers. August gold futures last traded at $1,884 an ounce, up 0.57% on the day.

John Feneck, founder of Feneck consulting, said that gold prices and the gold equity sector will continue to benefit from the weaker-than-expected employment numbers.

“Another disappointment and in line with what we have been predicting for months: that job recovery will take a long time, as Americans have become used to handouts,” he said.

Although the latest employment data was below expectations, economists have said that the market impact is much less than the previous month, which saw one of the biggest misses in expectations in the report's history.

"This is a disappointing number, but it's not some kind of catastrophe; it's well within the accepted range. It's a goldilocks number for stocks because it pushes a taper further off the table but doesn't point to a slowdown in the economy," said Adam Button, chief currency strategist at Forexlive.com.

Looking at the unemployment rate, economists and market analysts noted the decline noted that the drop was due to falling participation rates as workers left the job market. The participation rate dropped to 61.6%, down from April's reading of 61.7%.

While the headline data was weaker than expected, the report noted positive revision to April and March data. March's employment numbers were revised up to 785,000 jobs, compared to the previous estimate of 770,000. Meanwhile, April's data was revised to 278,000 jobs, compared to the initial estimate of 266,000.

Positive for the gold market, wage inflation continues to pick up. The report said that average hourly wages increase by 14 cents or 0.5% to $25.60 in May. The latest increase some after April's 0.7% jump in wages.

"The data for the last 2 months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages," the report said.

Katherine Judge, senior economist at CIBC, described the latest jobs report as "underwhelming." However, she added that the Canadian Bank is optimistic that the labor market will continue to improve through the summer.

"Our research suggests that generous unemployment benefit supplements have been the main factor holding employment gains back amidst record levels of job openings, but with many states moving to end the supplements in June, we expect millions of jobs to be added over the summer months. That would likely be enough to allow the Fed to announce at its September meeting a tapering of QE to start in early 2022.

Paul Ashworth, chief U.S. economist at Capital Economics, noted that at any other time, a jobs report of over half a million would have been a significant achievement for the U.S. labor market. However, he noted that there is still a long way to go before the labor market returns to pre-pandemic levels.

"The 559,000 gain in non-farm payrolls in May was at least an improvement on the 278,000 gain in April, but, with the level of employment still 7.6 million below its pre-pandemic peak, it would take more than 12 months at that pace to fully eradicate the shortfall," he said.

Ashworth added that at the current pace of job growth, investors shouldn't expect the Federal Reserve to shift its current monetary policy anytime soon.

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