Gold Rises In Face Of Impressive Jobs Report

The big news today in trading, of course, is the jobs report from the U.S. Department of Labor.

June's huge jobs number beat predictions with a stick. It was surprising, given May's disappointing data. The U.S. economy added 287,000 non-farm payrolls last month, 112K more than estimates.

The reaction is very telling. First, we should note that the average for the last three months is 147,00. Nothing to sneeze at, but nothing to call out the oom-pah band for. It is exactly that sort of splitting of an economic hair that pleased equities traders.

The Fed looks to be secure in a straitjacket at least for the July FOMC meeting. The jobs number simply isn’t good enough to raise the interest rate. If anything, the average shows some weakness even as the U.S. approaches full employment.

The labor force participation rate – the percentage of Americans at work or actively looking for employment – increased to 62% while hourly earnings increased one-tenth of one percent.

One observer called the average jobs growth a “Goldilocks number.” It’s not too hot, not too cold, but just right.

The Dow, S&P 500 and NASDAQ all rose – 1.40%, 1.50% and 1.60%., respectively. NASDAQ, which has been languishing lately, is up the most, mostly on consumer spending.

Gold tells an intriguing tale today. It cratered right after the jobs numbers were released but struggled back to even as the day wore on. At close it was up about $5 per ounce on speculative buying. Silver had slipped a bit earlier in the week but today is up a very impressive 2.90%.

Bond yields across the gamut are down while face prices are unchanged to slightly up. Of note: The Japanese benchmark 10-year is right at the -0.30% mark. (Yes, negative.) 

Currencies are stable, with the dollar bouncing around but in a very tight range against other major currencies. It felt as if everyone on the currency desks split early for another summer weekend.

David Kelly, chief global strategist at JPMorgan Asset Management, said he was unfazed by the jobs slowdown as measured in average over the last three months. He put it into amusing terms.

"The key thing here is this economy is a healthy tortoise. It's not a sickly hare," Kelly said.

"If you've got 1.5% growth in the long run, doing 150,000 jobs [per month] is actually a little bit above your normal capacity. I don't think there's any slack left in this labor market at all," he said.

If Kelly is right, we should see wage pressure shortly. Wage pressure leads to price inflation and price inflation leads to Fed action.

Wishing you as always, good trading,