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Gold prices under pressure after ADP says 278K jobs created in May; US labor market remains healthy but wage growth falling

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(Kitco News) - The gold market is seeing some selling pressure as the U.S. labor market continues to fire on all cylinders with private- sector jobs increasing more than expected last month, according to the latest employment report from payrolls processor ADP.

Thursday, ADP said that 278,000 jobs were created in May. The data significantly beat expectations as economists were looking for job gains of around 173,000. This is the second consecutive month that employment has surprised to the upside.

However, the threat of spiraling wage inflation appears to be muted as the report noted that wages continue to fall.

“This is the second month we've seen a full percentage point decline in pay growth for job changers. Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring,” said Nela Richardson, Chief Economist, at ADP.

The gold market is losing ground after seeing a solid bounce off a two-month low at the start of the week. June gold futures last traded at $1,959.30 an ounce, down 0.23% on the day.

According to some analysts, markets appear to be focusing more in employment data’s inflation implications as wage growth continues to cool. The CME FedWatch Tool shows a growing shift in interest rate expectations with markets now seeing the U.S. central bank holding rates unchanged later this month.

The report said that wages for workers who stayed in their jobs last month increased 6.5%, down from April’s increase of 6.7%. Workers who changed jobs last month saw their wage increase 12.1%, down a full percentage point from the previous month.

In a sector-by-sector breakdown, the report said that goods producing industries created 110,000 jobs last month with manufacturing seeing the only decline, losing 48,000 jobs. The nature resource/mining sector created 94,000 jobs in May and 64,000 jobs were created in the construction industry.

The service sector created 168,000 jobs last month, the report said; however, the health of the labor market was a mixed bag. The biggest growth was in the leisure/hospitality sector as 208,000 jobs were created in May. Trades/transportation/utilities saw job growth of 32,000; the information sector saw job losses of 15,000; financial services saw a decline of 35,000 jobs; professional and business services saw a decline of 5,000 jobs and education and health services saw a decline of 29,000 jobs; other services saw job gains of 12,000.

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