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Weakening Industrial Commodities Pull September Payrolls Down

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US non-farm payrolls added 142,000 in September, unemployment rate static at 5.1%

The employment situation is an eagerly awaited economic indicator that has great political and economic significance. These timely employment reports are released within a week after each month ends, providing valuable information on the job market and household earnings.

US non-farm payrolls added 142,000 jobs in September compared to 173,000 in August 2015, which is well below the consensus estimate of 203,000. However, the unemployment rate remained unchanged at 5.1% in September, providing some relief.

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XME falls with declining payrolls

According to the Bureau of Labor Statistics’ October 2 employment situation summary report, about 34,000 and 12,000 jobs were added in healthcare and information, respectively, in September 2015. Plus, mining jobs fell by 13,000 in September. The continued decline in mining employment suggests that the weakening demand for industrial commodities and the sluggish growth outlook is impeding the prospects of the mining sector.

Over the past year, the SPDR S&P Metals and Mining ETF (XME) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT) took a nosedive by 50.6% and 84.8%, respectively, as of October 2. Over this same period, Alcoa (AA) fell by 40.4%, Nucor Corporation (NUE) fell by 26.1%, Steel Dynamics (STLD) fell by 17.6%, and Reliance Steel & Aluminum (RS) fell by 15.7%.

Strong dollar

A strong US dollar has adversely impacted the export demand. Also, falling prices for commodities and crude oil due to oversupply further influenced the economic growth. Worsening employment is clearly an unfavorable sign that can provide an early warning that an economy is headed for trouble.

Data for factory orders are essential for gauging manufacturing activity, which we will cover in the next article.

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