A lower than expected non-farm payrolls report for September snuffed out an early morning dollar rally, and gave a much-needed lift to gold prices. Reuters reports that this is the third month in a row that job growth has disappointed economists. At 10am, spot gold prices are $5.30 higher, trading at $1260.50 per ounce. December gold futures are $7.50 higher. Spot silver prices are up by more than 1.25%, at $17.51 an ounce. December silver contracts are 16 cents higher.
The Department of Labor reported this morning that non-farm payrolls grew by 156,000 in September. Economists were expecting an increase of 175,000 jobs. Payrolls reports for August were revised upward by 16,000 jobs to 167,000. Meanwhile, July’s monster report of 275,000 jobs created was revised downward to 252,000.
Unemployment in September rose a tenth of a percent to 5%, as more long-term unemployed people returned to the job hunt. Wages grew by 0.2% in September for a year-to-date figure of +2.6%. Under normal circumstances, this would be a rather meager increase in wages, but since late 2015 this growth is actually far outpacing the rate of inflation.
The dollar was slightly lower on Friday morning following the NFP report. The greenback registered at just below 96.6 on the DXY dollar spot index, down 0.2%. This naturally helped the gold price. Elsewhere on the foreign exchange markets, the British pound continued to slump against its peers, tumbling to a fresh 31-year low of just $1.24. The sterling actually lost more than 6% in a matter of two minutes overnight in Asian trading. The “flash crash” event is being blamed largely on algorithmic traders. Nonetheless, concerns about the pound sterling and the British economy generally are rising as the heretofore unknown consequences of Brexit begin to come into closer focus.
The rally in crude oil prices was still going strong on Friday despite a minor setback for the two world benchmarks this morning. Both WTI crude and Brent crude were about 0.5% lower in early trading, but both yardsticks remained solidly above $50 per barrel. We could expect some more support for oil prices with Hurricane Matthew expected to cause a number of oil rigs along the Atlantic coast to idle. Natural gas prices jumped 1% higher, however.
Fed Officials Weighing In
Cleveland Federal Reserve President Loretta Mester was in the news again on Friday for suggesting that the non-farm payrolls indicate that the economy is on “solid” footing for a rate hike. Mester has a reputation for being a policy hawk: at the most recent FOMC meeting, she joined fellow Fed official Esther George and Boston Fed President Eric Rosengren in dissenting from the rest of the committee by voting for a quarter-point rate hike.
While members of the Fed have taken to talking up a rate hike in recent days, it’s still highly unlikely we’ll see a rate increase before December. There is no FOMC meeting in October and the November meeting, which will not have a press conference, comes right before Election Day.
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