U.S. Economy Batters Down Predictions

Fundamentally speaking, today’s U.S. job numbers and income-increase numbers are an ominous sign for gold prices. The solid, 321K monthly hiring figures for November was not only significant in quantity but in quality.

Sectors across the board saw jumps in employment. Most telling is the large addition of jobs in manufacturing. This is a bright spot for men’s employment, which suffered terribly during the recession. They are also higher-paying jobs than most, offering about $36 per hour.

Overall, income was up by about double what experts had been predicting.

This all spells “R-a-t-e R-i-s-e” from the Fed. Not that we are predicting it will come earlier than we have been forecasting, but it is becoming a surer bet. Let’s see how December and January pan out in jobs and income before we close the gates and fill the moats.

Ian Shepherdson, chief economist at Pantheon Macroeconomics expanded on the growth. “The key thing if you look at the run over the last few months is that this was a number waiting to happen. We’ve had strong hiring indicators in a number of surveys, and lower jobless claims, so sooner or later, we were going to get a blockbuster number.”

Why is November different? Sheperdson said, “The timing of this uptick is consistent with other evidence of economic growth.” He is underscoring the fact that in previous measurement periods, employment might be up but housing down, sentiment down but retails sales up, etc., confounding experts.

Although there will always be the boohooing hoppin’-gators, it’s smarter to remember that in November 2013, for instance, the unemployment rate was 7%, and the jobless rate five years ago this month was 9.9%. Today it is at 5.8% and people are streaming back into the labor market, which is what’s holding the UE rate up.

Another reason the American economy will zoom more is the price of gasoline. The average household will spend about $620 less this coming year than they did the last. At roughly 115M households that means consumers will have about $71.5 billion more in disposable income than they had in 2014.

As to outside markets, the dollar and U.S. equities naturally were up on the news. The rise in the dollar helped push WTI and Brent down once more. But it is more than a strong dollar at work on oil. It’s competition from the U.S. and Canada. That won’t go away anytime soon. Prices could settle and stay around $50 per barrel.

So, our eyes are on the strength of the U.S. economy and how the Fed might handle it.

Wishing you as always. good trading,