(Kitco News) - The gold market is trading lower on Wednesday morning after the latest employment data showed the U.S. labor market continues to deteriorate, according to private sector payrolls processor ADP.
On Wednesday, ADP announced that 32,000 jobs were lost in September. The report was far worse than expectations, as consensus forecasts called for job gains of 50,000. August’s figure was unrevised from the initial reading of 54,000 net jobs.
“Despite the strong economic growth we saw in the second quarter, this month's release further validates what we've been seeing in the labor market, that U.S. employers have been cautious with hiring,” said Dr. Nela Richardson, chief economist, ADP.
The gold market is trading lower after the latest employment data. Spot gold last traded at $3,878.42 an ounce, up 0.52% on the day.
The report also noted that annual wages were little changed in September with 4.5% year-over-year gains for job-stayers. “Pay gains for job-changers slowed to 6.6 percent from 7.1 percent in August, led by leisure and hospitality and financial activities,” the report said.
Losses were seen in multiple sectors, but largely concentrated in services, with the service-providing sector losing 28,000 jobs, while the goods-producing sector lost 3,000 net jobs.
"Ordinarily, ADP’s estimate of monthly employment is of secondary importance to macroeconomic trainspotters," said Bill Adams, Chief Economist for Comerica Bank in a comment to Kitco News. "It’s usually used mostly to preview job growth in the government’s employment report, which comes out two days after the ADP release in normal times. But financial markets will pay more attention to this ADP report since the government shutdown looks likely to delay the release of the government’s jobs report and most other official data."
"The ADP report could have outsize influence on the next Fed decision, too, if the shutdown lasts long enough to keep the Fed from seeing the Bureau of Labor Statistics’ September jobs report before their next decision on October 29," he added. "The weaker than expected ADP report makes the Fed more likely to cut the federal funds target another quarter percent at their October meeting."
"Comerica forecasts for the Fed to reduce the federal funds rate a quarter percent at both the October and December meetings."
Eric Teal, Chief Investment Officer for Comerica Wealth Management, told Kitco News that the job market continues to look stagnant, especially for the younger demographic.
"Workers in the lower half of the income distribution, who compete most directly with immigrants for work, should benefit as the labor market tightens," he said. "Again, this should provide additional information to support more accommodative monetary policy and stimulate the economy and consumption."
