April non-farm payroll data
The NFP (non-farm payroll) shows the number of jobs added or lost each month. The BLS (U.S. Bureau of Labor Statistics) released the employment situation summary for April on May 8. The NFP employment figure increased by 223,000—slightly below market expectations of 228,000.
One major surprise was the sharp downward revision of March’s job gain to 85,000 from 126,000 earlier.
NFP represents the total number of paid US workers of any business, excluding farm workers, private household employees, and nonprofit organization employees.
Job adds breakup
Manufacturers only added 1,000 jobs in April after a flat reading in March.
In contrast, construction companies added a healthy 45,000 jobs—the highest number in the past 16 months. The strong increase is mainly due to the recovering construction sector after cold weather.
Job adds in high-paying professional and business services were strong. They added 62,000 jobs in April. Over the previous three months, job gains averaged 35,000 per month.
The mining industry, including oil and gas, cut 15,000 jobs in April. YTD (year-to-date), mining cut 49,000 jobs due to the industry’s weak pricing environment.
Why jobs data matter
The jobs report serves as an important barometer of economic health and growth across all of the economy’s sectors. More jobs also mean more money for consumers and an increase in overall consumer spending. The Fed also assesses jobs data to determine whether the economy is strong enough to withstand higher interest rates.
Implications for gold investors
The jobs report was mixed with strong job adds in April and a disappointing steep downward revision for the numbers in March. Usually strong job additions translate into higher consumer spending—it forms about two-thirds of the US economy. So, it’s also usually negative for gold prices and ultimately gold-backed ETFs like the SPDR Gold Trust ETF (GLD).
Other affected investments include Eldorado Gold (EGO), Agnico Eagle Mines (AEM), and Sibanye Gold (SBGL). It also affects ETFs that invest in these stocks like the VanEck Vectors Gold Miners Index ETF (GDX). Agnico Eagle Mines and Sibanye Gold account for 7.1% of GDX’s holdings.
Wage growth and the unemployment rate are other important factors used to determine the strength of the labor market. We’ll discuss these factors in the next part of this series.