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US Non-Farm Payrolls Fall Short of Expectations

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Updated

July non-farm payrolls data

The NFP (non-farm payroll) data show the number of jobs added or lost each month. The U.S. Bureau of Labor Statistics released the employment situation summary for July on August 7. The NFP employment figure rose by a seasonally adjusted 215,000 in July. The figure was below market expectations of 223,000. The job additions data for June were revised upwards from 223,000 to 231,000.

Although the data for July isn’t much of a relief, the upward revision added a hint of positivity to the NFP.

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Analyzing the job adds

Job adds in high paying professional and business services were strong. The sector added 40,000 jobs in July after adding 69,000 jobs in June. This kept with June’s positive momentum.

Construction payrolls rose by 6,000 after reporting no change in July.

Employment in retail rose by a solid 35,900. In contrast, the mining industry continued to cut jobs for the seventh month in a row. The industry cut 4,000 jobs in July. YTD (year-to-date), mining cut 75,000 jobs due to the industry’s weak pricing environment.

Impact on gold investments

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 a rise in overall consumer spending. This is good for the US economy. The current report was strong enough to keep the market expectations for a Fed rate hike in September on the table. In turn, this is 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 Franco-Nevada (FNV). A strengthening economy also affects ETFs that invest in these stocks like the VanEck Vectors Gold Miners Index ETF (GDX). Agnico-Eagle Mines account for 5.10% 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.

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