May non-farm payroll data
The NFP (non-farm payroll) shows the number of jobs added or lost each month. The U.S. Bureau of Labor Statistics released the employment situation summary for May on June 5. The NFP employment figure increased by 280,000. It was above market expectations of 226,000.
The job adds of 280,000 were higher than 221,000 for April and 199,000 for March.
Analyzing the job adds
Job adds in high-paying professional and business services were strong. They added 63,000 jobs in May. This kept with April’s positive momentum.
Employment in leisure and hospitality was also quite strong with 57,000 job adds.
Employment in the construction sector also continued on a uptrend with 17,000 job adds in May after a healthy 45,000 adds in April.
In contrast, the mining industry continued to cut jobs for fifth month in a row. The industry, including oil and gas, cut 17,000 jobs in May. YTD (year-to-date), mining cut 68,000 jobs due to the industry’s weak pricing environment.
What does it mean for gold investors?
The Fed assesses jobs data along with other data to determine whether the economy is strong enough to withstand higher interest rates. More jobs mean more money for consumers and an increase in overall consumer spending. Consumer spending forms two-thirds of the overall US economy. A strengthening economy is usually negative for gold’s investment appeal. As a result, 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.