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Hiring slowed to crawl in February as employers added just 20,000 jobs vs the 180,000 expected. Unemployment dropped to 3.8% as government employees returned to work. Urban areas across the country continue to grow at a steady pace while rural areas have lagged. Gold breaks dollar correlation following the jobs report, a sign of strength for gold bulls.

Jobs Report Recap:

20,000 jobs were added in February missing analyst expectations of about 180,000. This is the weakest report since September of 2017. Even though the report was weak the report still marks 101 months of consecutive job gains. Unemployment rate came in at 3.8% vs 4% in January’s report. A large contributor to the decreasing unemployment rate is the government reopening after a 35-day shutdown. During the 35-day shutdown many government employees were technically unemployed and taking on part time jobs. Individuals who were temporarily unemployed increased by 175,000 in January and workers taking part-time jobs for economic reasons jumped by about 500,000. Both figures were strongly affected by the shutdown. Nominal wage growth has also been increasing. These gains are partially attributable to minimum wage increases in numerous states.

Trends in the Job Market:

Rural areas have experienced much slower growth than the rest of the nation. Even though opportunities are scarce in these regions people are not willing or unable to move. Job growth among urban areas has been evenly distributed. Hispanics, African-Americans and the disabled are groups that continue to have above average unemployment despite the country as a whole experiencing above average growth. As culture changes so does the labor force which is why we have seen women begin to represent a larger piece of the workforce. In 1990, 74 percent of women aged 25 to 34 had jobs compared to 77 percent today. For men the trend has gone the other way decreasing from 95 percent to 89 percent over that period. One thing to keep in mind when looking at the jobs headlines is that each month individually is not as important as the overall trend. During this 10-year expansion we have had several reports where monthly job gains fell below 100,000. These individual reports will cause asset prices to fluctuate in the interim, but the long-term trends are more important to watch. The economy has started to slow in 2019 with growth for the first quarter expecting to be about 1% (measured by GDP growth). 

Gold and Dollar Price Action:

fed jobs data

The top chart above is April Gold Futures and the bottom is USD/JPY.

Following the jobs report we saw the dollar and equities take a big leg down while gold caught a strong bid. Spot gold jumped almost $6 per ounce immediately following the report. In the 30 minutes following the report gold continued to rally until getting rejected by the $1300 handle, continuing to hover just below 1300 for most of the day. During the 30 minutes following the report dollar, equities, and gold were all trading up. As we approach the close the Dollar has regained almost all the loss following the jobs data while gold has continued to stay at its elevated levels. Seeing gold break these correlations begins to create a stronger bull case for gold.

Ryan Page

Ryan Page has worked for 3 years as a commodities derivative’s trader. He has been building models to analyze global macro data and evaluate risk for more than 5 years.

Ryan has been trading since he was 14 years old. He enjoys playing mid to high stakes poker, with immense experience studying and applying game theory.