GoldPrice.

Job growth in nonfarm payrolls surged in December by 312,000 positions, nearly doubling expectations of surveyed economists. The surprising growth may have contributed to a dip in gold prices this morning, tempering recent growth. Meanwhile, unemployment rose by 0.2%.

Key Takeaways

• December saw nonfarm payroll employment surge by 312,000 positions compared to just 176,000 forecast by surveyed Dow Jones economists.
• Because more workers entered the workforce, the unemployment rate rose by 0.2% with the number of unemployed persons increasing by 276,000 to 6.3 million.
• Wages increased by 3.2% annually and 0.4% monthly, matching October’s annual increase which was the highest since 2009.

Despite the bump in the unemployment rate, the labor market data for December 2018 is unexpectedly strong with 312,000 nonfarm payroll positions added. The rise in unemployment is not due to terminated positions but an influx of new workers entering the workforce which added 419,000 in December.

The labor force participation rate actually increased in December by 0.2% compared to November’s rate, and 0.4% higher annually. The rate of participation is now 63.1%.

An indicator used to measure unemployment including discouraged workers and workers holding part-time jobs out of necessity saw no change in December, remaining at 7.6%.

Wages and Work Hours

Wages increased by 3.2% in December compared to the same time the year before, and increased by 0.4% from November 2018. December’s year-over-year increase matches October’s rate of growth which was the highest jump in wages since April 2009. Meanwhile, the average work week rose 0.1 hour to 34.5 hours.

The annual and monthly wage increases surpassed expectations by 0.2% and 0.1% respectively, though expectations also predicted the unemployment rate falling to 3.6%.

Strong Economic Growth

The strong data closes 2018 which was the strongest year for the US economy since the economic collapse of the late 2000s.

In total, payroll growth rose by 2.6 million, a 3-year high. Health care added 50,000 jobs in December with 38,000 ambulatory services positions added and 7,000 new hospital jobs. Healthcare saw 346,000 new jobs added for the year compared to 284,000 the year before.

Restaurants and bars added 41,000 new jobs in December, 235,000 for the year which is down from 261,000 the year before. Construction employment rose despite a decline in the housing market, adding 38,000 December jobs with a yearly total of 280,000.

Manufacturing grew with a 37% increase in jobs added compared to the year before, and retail added 92,000 jobs, counteracting the 29,000 drop seen in 2017.

November’s data was revised upward from 155,000 to 176,000 and October’s count was revised downward from 274,000 to 237,000, with the difference being a net gain of 58,000 overall compared to initial estimates for the two months, bringing the Q4 average up to 254,000.

WOW! US nonfarm #payrolls rose by 312K in December, far more than expected. Yet, unemployment rate rises to 3.9%. pic.twitter.com/7Om1l5AO6K

— jeroen blokland (@jsblokland) January 4, 2019

Expert Outlook

Natixis IM Chief Market Strategist David Lafferty stated that the “most interesting part of the report was the jump in labor force participation rate”, with a 0.2% jump in unemployment despite the strong 312,000 nonfarm payrolls, speculating that it may be “job seekers coming out of the woodwork”.

Market Reaction

The price of gold has slipped with an increase in selling pressure following the very strong labor market data released this morning. Gold had been within a hair’s breadth of the $1,300 mark but has dropped 0.71% to $1,282.66/oz with a high of $1,298.29/oz on the day.

February Gold Futures dipped even further with a loss of 0.64%, last trading at $1,286.50/oz.