(Kitco News) - Despite growing economic headwinds, the U.S. labor market continues to show resilient strength, as the economy created more jobs than expected last month.
The latest employment numbers are keeping gold prices steady as the metal tries to regain bullish momentum following Thursday’s sharp selloff to $3,200 an ounce.
The Bureau of Labor Statistics reported on Friday that U.S. nonfarm payrolls rose by 177,000 in April. This figure beat consensus forecasts, as economists had anticipated job gains of around 138,000.
“Employment continued to trend up in health care, transportation and warehousing, financial activities, and social assistance. Federal government employment declined,” the report said.
Although the labor market is slowing, the pace appears to be gradual, as the unemployment rate remained unchanged at 4.2%, in line with economists’ expectations.
The gold market has not reacted significantly to the latest employment data. Spot gold last traded at $3,253 an ounce, up 0.46% on the day.
The better-than-expected official employment data provides some relief after what has been a difficult week for the labor market. On Tuesday, the government reported a sharp drop in the number of available job openings. On Wednesday, payroll processor ADP reported disappointing private-sector job growth of 62,000. Finally, weekly jobless claims showed a sharp rise in workers applying for first-time unemployment benefits; the report also indicated that laid-off workers are facing challenges finding new jobs.
“The market is taking this as good news for the US dollar and I can get behind that as it shows steady hiring. S&P 500 futures are up 1% and have gained since the data,” said Adam Button, Chief Currency Strategist at Forexlive.com
Although the headline nonfarm payroll report showed solid employment growth, wage growth appears to be stalling. The report said that average hourly wages were $36.06, increasing by six cents, or 0.2%, last month, compared to March’s increase of 0.3%. Economists had expected a 0.3% rise.
“Over the past 12 months, average hourly earnings have increased by 3.8 percent,” the report said.
Weak wage growth could provide some support for gold prices, as it suggests inflation pressures are moderating — potentially giving the Federal Reserve room to cut rates later this year.
The Federal Reserve is maintaining a neutral monetary policy and has said it is in no hurry to cut interest rates, as the U.S. labor market remains relatively healthy and inflation risks continue to rise.
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said in a note that the latest employment data is providing a much-needed balm for markets; however, he added that tariff uncertainty continues to pose a significant risk for financial markets.
“While recession fears are still simmering on the back burner, the buy-the-dip dynamic can continue – at least until the tariff pause runs out,” he said. “We’ve already seen how financial markets will react if the administration moves forward with their initial tariff plan, so unless they take a different tack in July when the 90-day pause expires, we will see market action similar to the first week of April.”
