(Kitco News) - The gold market is seeing some solid selling pressure as the U.S. labor market continues to fire on all cylinders, creating significantly more jobs than expected in December.
U.S. nonfarm payrolls rose by 216,000 last month, according to the Bureau of Labor Statistics. The monthly figure handily beat market consensus estimates of 168,000.
At the same time, the unemployment rate remained unchanged at 3.7%; economists were expecting the rate to rise to 3.8%.
The stronger-than-expected employment data is weighing on gold with prices falling sharply in initial reaction. Spot gold last traded at $2,027.70 an ounce, down 0.74% on the day.
Analysts note that the robust employment data could add to the shifting market expectations that are starting to price out a March rate cut. Economists note that the Federal Reserve has been explicit that it needs to see some slack in the labor market before it would be comfortable easing its restrictive monetary policies.
Some commodity analysts have said that the gold market could see some short-term selling pressure as a March rate cut appeared to be a little premature.
Not only is the U.S. economy still creating a significant amount of jobs, but wages continue to rise, adding to inflation pressures. The report said that average hourly wages increased 0.4% or by 15 cents to $34.27. According to consensus estimates, economists were expecting to see a 0.3% increase in wages.
The one weak spot in the employment numbers were downward revisions to November and October data. November’s employment numbers were revised down to 173,000, from the initial estimate of 199,000. At the same time, October’s jobs number was revised to 105,000 from the previous estimate of 150,000.
However, not all economists are celebrating the solid employment data. Paul Ashworth, Chief North America Economist, at Capital Economics said that looking at the finer details, there are some weakening trends brewing in the labor market.
“Gains in the preceding two months were revised down by a cumulative 71,000. The increase in December was once again concentrated in only a few non-cyclical sectors, with government employment rising by 52,000 and health & social assistance employment up by 59,000. To the extent that it is still a leading indicator of broader employment trends, the 33,000 decline in temporary jobs is also a concern,” he said in a note.
