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US Jobs Data in April: Reading between the Lines

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US job growth data mixed

The Bureau of Labor Statistics released US jobs data for April 2018 on May 4. The data was mixed. The US economy added fewer jobs than expected in April. While economists were expecting 192,000 payroll additions, actual additions came in at 164,000. The job gains in April came from manufacturing, healthcare, and the professional and business services sector.

The wage growth once again remained muted. The average hourly wages grew 0.1% month-over-month and 2.6% annually. The annual rate was below the expectations of growth of 2.7%.

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Unemployment rate is at lowest in 18 years

After remaining at 4.1% for the last five months, the unemployment rate fell to 3.9% in April. This is the lowest it has reached in the last 17.5 years. While this might seem impressive at first, the devil is in the details. The drop in the unemployment rate is mostly due to the fall in the participation rate, meaning that many people stopped looking for work.

So, while job additions and wage growth came in below expectations, the fall in the unemployment rate is nothing to celebrate. The most worrying piece still remains the muted wage growth, which could have a wider impact.

US job data impacting these variables

The jobs report from the Bureau of Labor Statistics is a very closely watched piece of data, mainly due to the repercussions that jobs, wages, and unemployment data can have on the US dollar, inflation, and interest rates.

The mixed US jobs report did nothing significant to sway sentiments either way. The Fed also thinks US economic growth is on a strong path. A more aggressive stance from the Fed could be detrimental for gold. Higher interest rates are usually negative for gold (GLD) investments, as gold is not an interest-bearing asset.

Gold and stocks such as Pan American Silver (PAAS), B2Gold (BTG), Agnico Eagle Mines (AEM), and Yamana Gold (AUY) could be driven by economic data from the United States and the rest of the world. PAAS, BTG, AEM, and AUY make up 10.1% of the VanEck Vectors Gold Miners ETF (GDX).

Apart from full employment, inflation is one of the Fed’s main objectives. In the next part of this series, we’ll discuss the outlook for US inflation in this context.

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