(Kitco News) - The gold market is seeing modest buying momentum after the U.S. economy created significantly fewer jobs than expected in October.
U.S. nonfarm payrolls rose by only 12,000 last month, according to the Bureau of Labor Statistics. This monthly figure missed consensus forecasts significantly, as economists had expected job gains of around 100,000.
Some economists are downplaying the latest employment data, noting that the government warned of potential data uncertainty due to hurricanes that impacted Southern states early in the month.
“It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events,” the report said.
While the U.S. economy created fewer jobs than expected, the unemployment rate remained unchanged at 4.1%.
Wage inflation also increased, which, according to some market analysts, could put the Fed in a difficult position as the labor market weakens but inflation remains persistently elevated.
The report noted that average hourly earnings increased by 13 cents, or 0.4%, last month. Economists had anticipated wage growth of 0.3%. Over the past year, wages have risen by 4.0%.
The gold market appears to be taking the latest nonfarm payrolls data in stride, trading near session highs. December gold futures last traded at $2,769 an ounce, up 0.72% on the day.
Despite the headline payroll growth missing expectations sharply, it seems unlikely that the October jobs report will materially shift the FOMC’s policy outlook, particularly with figures likely skewed by various one-off factors,” said Michael Brown, Senior Research Strategist at Pepperstone, in a note. “A 25-basis-point cut next week remains on the cards, with further cuts likely at each subsequent meeting until the fed funds rate reaches a neutral level, around 3%, next summer. That said, if labor market conditions weaken considerably, likely reflected in a rise in unemployment north of the 4.4% year-end forecast, policymakers remain willing and able to respond with a larger 50-basis-point move.”
Looking past the volatile headline number, the report highlighted a weakening trend in the labor market as both August and September employment numbers were revised sharply lower.
August’s numbers were revised down to 78,000 jobs from the previous estimate of 159,000. Meanwhile, September’s data was revised down to 223,000, compared to the initial estimate of 254,000.
“With these revisions, employment in August and September combined is 112,000 lower than previously reported,” the report said.
