U.S Jobs disappoint for 2nd month- Negative for the US$, Positive for Gold

COURTESY OF BMO

 

U.S Jobs disappoint for 2nd month- Negative for the US$, Positive for Gold

 

 

THE BOTTOM LINE IS THAT TALKS OF FURTHER FISCAL STIMULUS ARE NEGATIVE FOR THE US$ AND POSITIVE FOR GOLD AND REAL ASSETS.

 

GOLD JUMPED $12 ON THE NEWS TO $1,208.

 

THE EURO JUMPED BY A FULL PENNY TO $1.3268 CONTINIUNG THE MASSIVE 11% RALLY FROM THE $1.1953 BOTTOM ON JUNE 7TH.

 

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U.S. nonfarm payrolls fell 131k in July, the second month of losses and a result that was below expectations. Revisions didn't make this figure look any better. June's 125k decline is now clocking in at a 221k drop, but May's 433k rise was revised down just a bit to a 432k increase.

 

Of course there special factors. After all, a decline was expected and was entirely due to the drop-off in census workers (-143k)……and some more government workers. The private sector created 71k jobs in July, below expected but still encouraging as it shows companies are hiring…..slooooowly. (This was also above the 42k gain reported by the ADP on Wednesday.) This does come as somewhat of a relief, particularly given the startling jump in yesterday's report on initial claims. All in, there were a number of troubling (yes, I am using that word again) developments, but a sprinkling of good news as well.

 

The household survey showed a 159k decline (the 2nd in a row), but as the labour force shrank by 181k (not nearly as much as June's 652k dive), kept the jobless rate from going for another ride. It held steady at 9.5%. The all-encompassing jobless rate held steady as well at 16.5%, down from the 17.4% high reached last October. Fed Chairman Bernanke's biggest worry, the long-term unemployed, actually improved a tad. The average duration of unemployment slipped to 34.2 weeks from the record 35.2 weeks in June. A very modest improvement indeed, and the first since February, but it is not going to make him any less worried.

 

As far as those industries that did hire, which ones did the heavy-lifting last month? Factories, again. For the 7th consecutive month, the manufacturing sector added jobs, with the 36k increase supported by the move in the manufacturing ISM component. Retail trade added jobs for the first time in a few months. Health services and education is still going strong (despite what we saw in the nonmanufacturing ISM the other day). Who cut? Construction…..no surprise there. And for the first time since September 2009, temp jobs were cut. This is an interesting component…….it is typically viewed as a "precursor of more permanent employment" (as Fed Chairman Bernanke said in April of this year) but despite the nine months of gains (until July), we haven't seen a significant pick up in hiring. This suggests companies are not confident enough to take on the responsibilities associated with a permanent worker, and are only hiring temporary workers to do the job. And now that we saw a drop in July……it will be worrisome if they decline again in August. Try not to derive too much from a one-month decline.

 

In 1,000s, Change       July    June  (Prev)     May  (Prev)                

in Nonfarm Payrolls    -131    -221    -125     432     433                

Jobless Rate (Pct)       9.5     9.5     9.5     9.7     9.7                

 

Earnings, Hours of All Private, Non-Farm workers:

                        July    June  (Prev)     May  (Prev)                

Avg Weekly Hours        34.2    34.1    34.1    34.2    34.2                

Manufacturing Hours     40.1    40.0    40.0    40.5    40.5                

Overtime Hours          2.9     2.9     2.9     3.0     3.0                

Earnings/Hour (dlrs)   22.59   22.55   22.53   22.55   22.55                

      Pct change         0.2     0.0                                        

 

Earnings, Hours of Private, Non-Farm Production workers:

                        July    June  (Prev)     May  (Prev)                

Avg Weekly Hours        33.5    33.4    33.4    33.5    33.4                

Earnings/Hour (dlrs)   19.04   19.02   19.00   19.00   19.00                

      Pct change         0.1     0.1                                        

 

Non-Farm Month-On-Month Payroll Changes by Industry (1,000s):

                        July    June  (Prev)     May  (Prev)                

Total Private             71      31      83      51      33                

Goods-Producing           33      -3      -8      21      13                

Construction             -11     -21     -22     -29     -30                

Manufacturing             36      13       9      39      32                

Service-Providing         38      34      91      30      20                

Wholesale Trade          8.4     2.2     1.0    -1.0    -2.3                

Retail                   6.7   -20.5    -6.6    -5.8   -10.9                

Transp/warehousing      12.2    15.0    14.6     8.7     9.2                

Information                1     -14      -8      -2      -4                

Financial activities     -17     -12     -15      -9     -12                

Professional/business    -13      23      46      26      25                

Temporary help svs      -5.6    11.2    20.5    30.4    31.1                

Leisure/hospitality        6      21      37     -15      -8                

Government              -202    -252    -208     381     400 

Source: Thomson Reuters

 

Here's a few more positive tidbits…..Aggregate hours worked rose 0.4%, and the private workweek climbed. And, average hourly earnings ticked up 0.2%, keeping the y/y increase steady at +1.8%.

 

The Bottom Line: The economy is growing. And the private sector has been hiring…..for seven months in a row, in fact. So there is demand, and there is job creation. Just not enough to soak up the number of unemployed Americans.

 

 

 

Jennifer Lee

Senior Economist, Vice President

BMO Capital Markets, Economic Research

jennifer.lee@bmo.com

416-359-4092